Trust bank investment provider brings in Smith Group's leveraging approach. GlobalBridge, a third-party separately managed account (SMA) provider to trust banks and wealth advisories, has added Smith Group Asset Management's 130/30 strategy to its roster of alternative offerings.

"With the addition of the Smith Group 130/30 strategy, our trust bank and wealth manager partners can effectively compete for the over $350 billion that is expected to flow into 130/30 plans over the next three years," says GlobalBridge's head of business development Bob Whitt.

Alternatives to alternatives

A 130/30 strategy involves swapping declining stocks for ones that are expected to do better. The 130-30 ratio refers to the practice of shorting stocks up to 30% of the portfolio value and using the leverage to take long positions in stocks deemed likely to outperform the market. The point is to get most of the returns from the long part of the portfolio.

Some view 130/30 strategies as alternatives to hedge funds. Industry sources says that half of U.S. pension plans and around 17% of foundations and endowments plan to increase their positions them over the next few years.

"A 130/30 strategy relaxes the long-only constraint and allows investment managers to short-sell securities they view negatively," says Smith Group partner Kent Smith. "Results of our portfolio show [that] the 130/30 delivers enhanced returns above [a] long-only large-cap core growth [strategy], with a similar risk profile."

Dallas-based Smith Group managed around $6 billion at the end of 2007, mainly for high-net-worth clients.

Minneapolis-based GlobalBridge says its Open Custody SMA is the only program that offers complete open architecture in trust accounting systems, custodial relationships, investment vehicles, trading and investment manager selection. -FWR

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