Napans looking for financial advice have plenty of options, from small independently owned firms to larger corporate entities such as Merrill Lynch or Morgan Stanley. But one Napa business has taken a unique step to stand out from the crowd.
Tim Ayles and George McCuen, partners in Napa Wealth Management, have created their own mutual fund. As far as they can determine, it is the only independent Napa company to have created such an investment vehicle.
The NWM Momentum Fund went live on April 1, April Fool’s Day, but this is no joke to Ayles and McCuen. The partners and their firm spent six months and approximately $40,000 to set up the mutual fund.
“It is quite a challenge,” said Momentum Fund co-manager McCuen.
“You have to develop an investment strategy that is unique, file with the U.S. Securities and Exchange Commission (SEC), employ a fund administrator to handle the accounting and reporting details, have an independent board of trustees and more,” he said.
“It’s not something you can throw together overnight,” he said. “We are excited beyond measure about this accomplishment.”
The Momentum Fund is a “no-load” fund, or one that doesn’t charge a commission or sales charge when shares are sold. The fund charges less than 2 percent annually in management fees and other operating expenses. As the funds grows, that figure will go down, said Ayles.
Operating expenses per year are expected to run between $120,000 to 150,000, the partners said. The minimum investment to join the Momentum Fund ranges from $1,000 to $5,000, depending on whether investments are one-time or ongoing.
Initially valued at $10 per share, at the end of the fund’s second day, shares were valued at $10.04.
McCuen said Ayles, both Napa natives, came up with the idea several years ago. The formal process to create such a fund began in November.
A mutual fund is a common investment strategy in which a company brings together money from many people and invests it in stocks, bonds or other assets.
The NWM Momentum Fund is “multi-asset tactical,” Ayles said. “I believe we have a strategy that makes sense for investors.”
The fund invests in many types of assets such as stocks, bonds, commodities and real estate. The Momentum Fund owns more asset classes than a typical mutual fund and it only owns them when they are performing well, he said.
“Most funds stay fully invested in the market. We have the flexibility to convert to 100 percent cash” when necessary, Ayles said.
McCuen said he couldn’t speculate on how his fund’s investment strategy might have performed during the 2008 market crash when stocks dropped more than 38 percent.
“We can say that the model utilized to manage the fund is designed to seek safety during collapsing markets by positioning the portfolio heavily, if not exclusively, in treasuries, cash and cash equivalents,” he said.
“Our first goal is to try to not have a losing year,” he said. Of course, “There is no guarantee of that.”
As far as actual returns, “We hope to stay up with the market when it’s performing well and avoid the large drops so that it’s easier to make up lost ground,” said Ayles.
The fund’s first investors are Napa Wealth Management’s existing clients — between 120 and 130 households, the co-managers said.
Asked why a non-client would choose to sign up for an unproven mutual fund, Ayles admitted that some investors would rather wait several years to evaluate the fund’s performance. However, “The bottom line is it comes down the strategy. You can’t find this strategy anywhere else.”
The fund expects to contain more than $25 million by the end of the first quarter. “We could see managing over $100 million in our fund at some point,” said McCuen. “If it goes well, we might launch another fund.”
“Once you have been through the process the first time, it isn’t as daunting to go through it again,” he said.