A New Kind of Hedge Fund – Born in Pawleys Island, South Carolina

There is a new kind of hedge fund being managed right here at the beach along the South Carolina Coast.  One day I was thinking about my advisory business, and I wondered how I could feasibly pool the money that my clients had for the stock portion of their portfolios.  It would reduce the overall costs to the investors, and hence increase their returns.  As I started to run the numbers and build out the structure, I realized there was also a huge pending change to the hedge fund industry mandated by Congress to the Securities and Exchange Commission as a part of the Jobs Act – Hedge Funds would now be able to advertise.  I had a solid two year track record from which to build for a dividend stock fund and a growth stock fund.  Beautiful!  The icing on the cake – during a portfolio review one of my clients was wowed by the performance of my stock recommendations and he said: “With these numbers, you need to start a hedge fund!”  Then I really knew the idea was on its way to being something great for clients.

Managers of domestic equity funds and pooled accounts face a problem – fund flows impair performance.  Typically, huge assets flow in as the stock market is peaking, and conversely the money supply dries up when the market enters bear territory.  Managers are forced to buy high and sell low, the reverse of the desired strategy.  Hedge funds constrict the flow of funds to address this problem, but the restrictions are inconvenient to clients.  The high fees of a typical hedge fund (2% of assets annually plus 20% of all gains) also hamper performance.  So why not combine the best of both worlds?  The Pawleys Dividend Fund and the Pawleys Growth Fund solve these problems.  These South Carolina hedge funds were formed with the low cost structure of a typical mutual fund or unit investment trust, combined with a reasonable lock-up period and structure which systematizes the flow of funds into the portfolios.  The initial minimum is $100,000 for each fund, which also minimizes the impact of expenses on performance.  Investors who do not yet meet the minimums or requirements can invest in the portfolis as an advisory client, and also enjoy enhanced financial planning.

The funds are new, innovative and exciting.  Stay tuned to see more about the performance results, or give me a call in the meantime to learn more!

© 2013 Pawleys Investment Advisors, LLC. All rights reserved.

Risks and Disclosures:

This information regarding our services is not an offer of securities or investment advice and is provided solely for prospective clients to contact us. Past performance does not indicate future results and you may incur losses.

The Limited Partnership Interests offered hereby have not been registered under the United States Securities Act of 1933, as amended (the “Securities Act”) or any applicable state or foreign securities laws. The Interest have not been approved or disapproved by the United States Securities and Exchange Commission (“SEC”) or any state or foreign regulatory authority nor has the SEC or any state or foreign regulatory authority passed upon the accuracy or adequacy of this private placement memorandum or endorsed the merits of this Offering. Any representation to the contrary is unlawful. Please contact Pawleys Capital Management, LLC to obtain a Private Placement Memorandum. An investment in one of the Pawleys Funds presents risks which are outlined in the Memorandum. You must qualify as an accredited investor according to the Securities Act of 1933 (“the Act”). Banks, insurance companies, registered investment companies, business development companies and small business investment companies meet the definition of accredited investor. Natural persons must have an individual (or joint if married) net worth that exceeds $1 million excluding the primary residence, OR income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year. Business entities qualify if all equity owners are accredited investors. Trusts must have assets in excess of $5 million, and may not have been specifically formed to acquire the securities offered. Charitable organizations, corporations or partnerships must have assets exceeding $5 million. Please consult with your tax or legal counsel if you have any questions regarding Rule 506 of Regulation D of the Act. Resale restrictions apply.

If you do not qualify as an Accredited Investor, please contact us regarding our Advisory Services which are available with no minimum financial requirements. Advisory clients enjoy enhanced customization of portfolio management and financial planning services. Pawleys Investment Advisors, LLC is a Registered Investment Advisory Company – SEC Firm CRD #155199.

Hedge Fund Advertising from South Carolina

As the manager of The Pawleys Dividend Fund and The Pawleys Growth Fund, I am excited.  Effective today, a ruling by the Securities and Exchange Commission will lift an age-old ban on advertising by private investment funds.  Mandated by Congress last year as a part of the Jumpstart our JOBS Act, the change removes restrictions on business growth and capital formation.  By allowing private funds, including hedge funds, to publically solicit for new investment dollars, the new rule will free capital formation within the economy.  The additional stimulus will lead to growth and the creation of new jobs.  Last year, the SEC started accepting comments from the public about the new ruling to finalize the structure.  Investor advocates are concerned that people may be unable to evaluate risks associated with investing in private funds.  To protect investors from fraudulent offerings, the SEC added a brand new “bad actor” rule that disqualifies individuals with certain criminal convictions or prior fraudulent activity from offering these securities.

In reality, hedge funds and privately offered funds are only open to high net worth clients who tend to have more experience investing, and hence can evaluate sophisticated funds.  Each Pawleys fund carries a $100,000 initial minimum investment, and both fall under the new ruling.  Investor advocates are concerned, but the added transparency is a huge bonus for the public.  Managers who have delivered solid performance can now shout it from the rooftops and be recognized for their results, and those managers who fall behind will be revealed.  I provides complete transparency to my investors by publishing all portfolio holdings.

Until now, it has been virtually impossible to find general information about hedge fund and private equity investments.  Websites that publish information lock out the public by requiring usernames and passwords to gain access.  The new transparency will make information more readily available to prospective investors, making it easier to compare different funds.  The ruling applies to funds that are not registered with the SEC, but are formed under Regulation D Rule 506 of the Securities Act of 1933.  To improve their ability to monitor the market and protect investors, the SEC has also incorporated additional filing requirements for unregistered funds.

© 2013 Pawleys Investment Advisors, LLC. All rights reserved.