A Subadvised Startup Opens, With an ESG Quant Ally
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Tuesday, September 29, 2020

A Subadvised Startup Opens, With an ESG Quant Ally

There's a new subadvised fund firm launching, and for their first fund they're partnering with an ESG quant shop.

Craig Andrew Urciuoli
Red Gate Advisers, LLC / The RBB Fund, Inc.
President, Co-Founder / Director of Marketing and Business Development
Yesterday Craig Urciuoli, director of marketing and business development at the RBB Fund series trust, unveiled Red Gate Advisers, LLC (RGA). The new Chadds Ford, Pennsylvania-based firm is led by a pair of co-founders: Urcioli, who serves as president of Red Gate; and Sal Faia, founder and president of Vigilant Compliance and president and chief compliance officer of RBB.

"Red Gate was created to help boutique investment advisors," Urciuoli tells MFWire. "There's a real opportunity for boutiques to thrive with the right platforms and the right partnerships. There's still space for that."

Salvatore "Sal" Faia
Red Gate Advisers, LLC / The RBB Fund, Inc. / Vigilant Compliance, LLC
Co-Founder / President, CCO / President, Founder
Also yesterday, RBB and Red Gate filed with the SEC for exemptive relief to launch the Stance Equity ESG Large Cap Core ETF. The fund, which will be the first offering from Red Gate, will be an active ETF subadvised by Boston-based Stance Capital, Red Gate first allied boutique asset manager, and administered by RBB. Red Gate is also licensing Blue Tractor Group's Shielded Alpha active ETF wrapper, which will be used for the new fund.

"The demand for ESG growing, and Stance's long-term and impressive track record, combined with its proprietary risk optimization approach, uniquely positions them for success," states Arnold Reichman, chairman of the RBB board.

Bill Davis, managing director and founder of Stance, confirms that the strategy that will power the new fund is his firm's flagship strategy, which until now has been "primarily offered through SMAs and more recently model delivery." He describes the strategy as an "actively managed, quantitative, large-cap core strategy."

"We're a relatively young company. We were purpose-built around values-driven investing ... This will be our first commingled vehicle," Davis tells MFWire. "The process began with establishing a relationship with RBB ... We were essentially looking for a series trust approach to an ETF."

Davis lauds RBB as "one of the leaders in the whole series trust space" and adds that he got to know the Red Gate team as they were forming the startup. He also praises Blue Tractor's approach to balancing portfolio holding transparency and the discretion that many active managers crave.

Meanwhile, the Blue Tractor team is "really pleased" to be teaming up with Red Gate, says Blue Tractor founder Terry Norman.

"They're going to be really successful," Norman tells MFWire. "There's a real hunger for smaller firms to access active ETFs," agrees Simon Goulet, co-founder of Blue Tractor.

Norman also praises Stance, noting that the quant shop's flagship strategy has "an impressive track record."

Red Gate is now one of seven firms that have licensed Shielded Alpha, Goulet confirms. (They've publicly revealed five of those clients.)

Looking ahead, Urciuoli and Davis confirm that Stance and Red Gate could team up on more funds down the line, and watch for Red Gate to partner with more boutiques, too. They can do both ETFs and traditional mutual funds.

"We are actively speaking with a couple of other firms," Urciuoli says. "I wouldn't be surprised to see us launch a couple of other funds, sooner rather than later."

Red Gate will also offer distribution and marketing support, for partnerships (like with Stance) where the boutiques want it.

"We have created a distinct and separate entity for sales ... that will be called Red Gate Distribution," Urciuoli says.

The Red Gate name is in part about the idea of opening "the gateway to the marketplace" on the one hand, Urcioli explains, and is on the other hand an homage to RBB (whose name stands for "Red Brick Building"). Yet Red Gate's funds, including the first one powered by Stance, will be branded solely with the boutiques' names, not with Red Gate's.

Indeed, Urciuoli puts the Stance partnership in the context of Red Gate's mission to help "undiscovered managers" who have differentiated approaches build their brands.

"This is the perfect example of what we're looking to bring to market," Urciuoli says.

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