Risk Management: Mutual Funds Aims to Protect Investors from Downside ; Knoxville Investment Firm Creates Tailored Fund Family

News Sentinel, March 3, 2014 | Go to article overview

Risk Management: Mutual Funds Aims to Protect Investors from Downside ; Knoxville Investment Firm Creates Tailored Fund Family


A Knoxville investment company creating three Nasdaq-traded mutual funds in the past two years might seem surprising until you hear more from Mike West.

"In 15 months, worst-case scenario, we will be at $1 billion in assets," says West, senior partner and CEO of BPV Capital Management.

West describes the mutual fund family -- which he expects to keep expanding -- as bringing complicated investment strategies that he and his partners have used to manage their own wealth, as well as that of family and friends, "to the masses."

"We protect investors from the downside," he says of the funds, which seek single-digit returns. "Our products solve problems, and let people sleep at night."

Combined, two of the funds -- the BPV Wealth Preservation Fund and the BPV Core Diversification Fund -- have more than $130 million in assets, while a third -- targeted to institutional investors with a strategy similar to the Wealth Preservation Fund -- opened in February.

With trading agreements on 21 platforms, West is assembling a management and marketing team to pitch the funds to advisers and is preparing to launch more funds managed by "best- -in-class advisers."

To fund that growth, BPV Capital Management -- the limited liability company that owns the mutual funds -- has sought its own investors. West filed documents with the Securities and Exchange Commission in June 2013 of his intent to sell $6 million in equity and in December 2013 seeking to raise $9 million. Both documents report the parent company's revenues at less than $1 million.

West declined to talk about the private offerings, citing fear of violating SEC rules. "We are committed to funding our growth," he adds.

Managing wealth

West returned to Knoxville, where he graduated from Farragut High School and the University of Tennessee, after the bust of the dot- com bubble. He had founded Greenville, S.C.-based HomePoint, a furniture online exchange, in 1999, and the company raised $72 million in private equity before closing its doors in 2001.

West set up Northshore Management in Knoxville to manage his family's assets, and later those of friends and family members.

Joining him was George Hashbarger, a former GE Capital executive who had met West when GE invested in Homepoint.

Hashbarger, CEO of Quintium Advisors, and West created several investment vehicles -- a hedge fund, a limited partnership with a diversified investment portfolio, and a portfolio company, 3GS Inc., which acquired numerous document-shredding companies.

"In 2008, we had a lot of friends who were coming to us and were having terrible results and didn't really know what to do," Hashbarger says. "They were literally asking, 'Will you take a look at my portfolio and tell me what you think.'

"In 2009, BPV formed, and we had individual clients for about 2 1/ 2 years," he says. "Then, we realized we had something pretty special and took our strategies and launched them in a mutual fund format."

The document-shredding business was sold to workplace services giant Cintas. The wealth management business was spun out as Oak Springs Wealth Management, and is run by former BPV partners from the historic Lones-Dowell House.

The mutual funds employ sophisticated strategies that Hashbarger says are essentially what Northshore applied to individual investors' accounts.

The Wealth Preservation Fund "is technically a hedge equity strategy," Hashbarger explains. "From an execution point of view that means we own the S&P 500 index long ... and then we use a basket of option strategies to hedge the underlying position."

The fund seeks an annualized return of 3 to 5 percent.

The Core Diversification Fund, he says, "was originally designed to be a complete portfolio," with assets invested in equities, Treasurys and commodities/alternatives.

The targeted return is between 5 and 7 percent, he says.

"Neither of our funds fit very well in a traditional Morningstar Style Box (a proprietary grid that provides the investment style of mutual funds), Hashbarger says. …

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