After months of testing and researching the investment strategy, we’re pleased to announce the launch of the Peloton Tactical Equity Fund. The Fund, along with our Road Map strategic financial advisory service, enhances our primary business managing customized investment portfolios for clients. It will be a complementary offering to our current work.

The following Q&A provides potential investors with a clear idea of how the Fund extends the Peloton mission.

Q: What type of fund is the Peloton Tactical Equity Fund?

A: The Tactical Equity Fund is structured as a Delaware Limited Partnership, and is exempt from certain registration requirements for public investments like mutual funds. It shares its basic structure with “hedge funds,” but is also different in several important ways:

  • It does not use leverage (debt)
  • We do not invest in illiquid securities or derivatives
  • The Fund is structured as “long-only”   


Q: How does Peloton’s Fund distinguish itself from other hedge funds?

A: The standard hedge fund fee structure is “2 and 20.” A management fee is charged annually regardless of performance – typically 2% of the assets in the fund. There is also an incentive fee (performance based) that is incurred if the fund beats its stated hurdle rate. In this structure the manager receives 20% of the gains above the hurdle rate. So if the benchmark returns 5%, and the example fund gains 15%, the manager is paid 4% for that period. If the fund loses value or doesn’t outperform the benchmark, the 2% management fee still applies. The Peloton Tactical Equity Fund is different because we’ve chosen to not charge a management fee. Instead, we only participate in the gains above our benchmark, which is the S&P 500 Total Return Index (i.e. “the market”). If the Fund loses value over a quarter, or if the Fund gains value but lags the market, there is zero fee. When the Fund delivers positive performance and beats the benchmark, Peloton’s incentive fee is 30% of the excess return. With a “zero and 30” structure, Fund investors only incur costs when the Fund’s objective is achieved.


Q: Who will invest in the Fund?

A: Accredited investors with a primary need for growth, and who won’t need to liquidity for one or more years may find the Fund attractive. Because the Fund’s trading strategy is expected to generate short-term gains, we believe tax-exempt investors (endowments, foundations) and tax-deferred accounts like IRAs (for individuals) are best suited to invest in the Fund.


Q: Will the Fund follow the same strategy as Peloton equity portfolios?

A: No. The Fund follows a quantitative method to identify securities with a high probability of short-term positive momentum. The trading discipline is calendar-based to optimize price return. So, while the Fund will invest in the common stocks of mid and large sized companies like we do in our core custom portfolios, the process it uses does not involve fundamental research of the businesses underlying the stocks.


Q: Does the fund have any impact on my current investment strategy?

A: No. Any investment in the Fund should be considered equity exposure for the purpose of maintaining the proper asset allocation for your comprehensive, diversified portfolio. We will continue to manage each piece of your portfolio to complement the others, including any investment in the Fund.


Q: Should I invest?

A: Not necessarily. We continue to believe that the best portfolio is one customized to an individual’s or family’s specific growth, income, and liquidity needs. Peloton portfolios are structured carefully – typically across several accounts – to meet every client’s unique needs. In contrast, the Tactical Equity Fund has one goal: outperforming the Standard & Poor’s 500 Index. In specific cases, the Fund could be a suitable piece of a total portfolio. If you have an interest, please contact our principals to determine if it would be in your best interest to invest in the fund.


Q: What else should I know?

A: Because the Fund’s minimum investment is $100,000, it doesn’t require that investors uproot their current advisory relationship.