What is a Spoke Fund® ?

A Spoke Fund® is a group of separate investor accounts linked to a portfolio containing most of the liquid net worth of that fund’s manager.

“Spoke Fund®” is short for “hub and spoke” model. The portfolio manager’s money is the hub and the spokes lead to each investor’s account. Any changes in the hub are simultaneously made in the spoke accounts. Thanks to technology, this can all be done pretty easily.

I like to think the result is a much more investor-friendly alternative to a mutual fund. It’s also a heckuva lot easier for a portfolio manager to run than any other kind of fund – or separately managed accounts.

As an investor in a Spoke Fund®, you know your portfolio manager is investing in the same stocks you are – at the exact same prices. He eats his own cooking. She has skin in the game. Pick your analogy – the point is that the portfolio manager is in it together with his or her investors.

I originally came up with the name “Spoke Fund” because Wall Street didn’t have a good way to describe this particular way to invest. It’s not a hedge fund, nor a mutual fund, nor a separately managed account. I think it’s better than them all, but, well, because I came up with the idea, I’m not exactly unbiased, knowhatImean?

To be clear – we’re really not doing anything revolutionary here. That word comes pretty cheaply these days. We’re still highly regulated, and all client money is held by a company owned by Goldman Sachs. Back in 2008, I just combined some new processes with some lesser-known tools and a new-at-the-time technology called a “model portfolio” to build a new kind of fund…one that I’d feel good about putting my family and friends in.

So, welcome to Mutual Fund 2.0. Or Hedge Fund 2.5.  Or SMA 3.0. Whichever you’d prefer, really.

Just know that IIM is the Home of the Spoke Fund®. And stay tuned for more.

– Cale Smith, Managing Partner, Islamorada Investment Management

Portfolio managers: please visit www.SpokeFund.com to apply to run your own Spoke Fund® at IIM.

Cale Smith

About Cale Smith

Portfolio Manager at Islamorada Investment Management.
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