The firm is aiming to disrupt the Canadian ETF space with a radical fee structure
Following through on a previous announcement, Accelerate Financial Technologies has launched three alternative ETFs that come with a unique fee structure: a 0% management-fee, performance-fee only compensation scheme.
“[W]e're excited to offer the first alternative ETFs with a 0% management fee, aligning investor and manager interests for the first time,” Accelerate Founder and CEO Julian Klymochko said in a statement teasing the launch.
The firm’s initial suite of ETFs, all trading on the TSX, consists of:
- Accelerate Private Equity Alpha Fund (ALFA) – seeking to achieve long-term capital appreciation, ALFA aims to replicate the long-run returns of private equity funds. It invests primarily in listed equity securities that are expected to outperform the US equity market, while entering into short positions in respect of US-listed equity securities. ALFA uses derivatives to gain short exposure, and borrows cash to increase its long-equities portfolio.
- Accelerate Enhanced Canadian Benchmark Alternative Fund (ATSX) – ATSX seeks to achieve capital appreciation and a risk-adjusted return that’s superior to the broader Canadian equity market over the long term. It invests primarily in Canadian and foreign issuers listed on an exchange or marketplace in Canada that represents the broad Canadian-listed equity market. It also seeks to add positive absolute return using a long-short overlay portfolio.
- Accelerate Absolute Return Hedge Fund (HDGE) – Like ATSX, HDGE seeks to achieve long-term capital appreciation and a superior risk-adjusted return relative to the broader Canadian equity market — but with lower volatility. It seeks to do this by investing primarily in listed equity securities expected to outperform Canada’s equity market, while selling short certain listed equity securities that are expected to underperform the market.
The funds’ performance fees, which are accrued daily and paid quarterly, will be based on their ability to go above a high watermark. ALFA’s performance fee is 15% of its outperformance over the high watermark. Meanwhile, ATSX will charge 50% of any outperformance over the high watermark/S&P/TSX Index, and HDGE will charge investors 20% of any outperformance over its high watermark.
The funds will also comply with applicable securities legislation with respect to limits on:
- The amount of all cash borrowed to finance the purchase of equity securities;
- The aggregate notional amount of derivatives used for non-hedging purposes; and
- The aggregate market value of securities that are sold short