Midwest Asset Management has launched an all-cap equity 130/30 strategy and is targeting institutional investors. Earlier this year, the firm launched a market- and sector-neutral U.S. equity strategy (MML, 6/16) and 130/30 is a further attempt to attract institutional clients, especially those that want to take on more risk. Several other firms, including State Street Global Advisors, Acadian Asset Management and First Quadrant, have launched this type of strategy, but James Byrd, president, thinks his firm is at an advantage given its small size. "Because of our structure and size, our livelihood is keeping clients happy," he said. "As an emerging manager, we've got to make it in this business, so we're not as concerned with profits as the larger institutions." 130/30 managers are permitted to take long positions worth up to 130% of their mandate's nominal amount and to go 30% short. The inclusion of short positions can boost portfolio returns without increasing systematic risk, Byrd said. The firm could customize the strategy to take 110/10 to 150/50 allocations, depending on clients' risk appetite.

Midwest aims to beat the Russell 3000 Value Index by 3% and have $50 million invested in the strategy by next year. To compete with the bigger players, especially hedge funds, Midwest will not charge a performance fee and will only have a 1% management fee. The firm is talking with existing clients and will soon start meeting consultants. Byrd would also like to be included in funds of funds and emerging manager programs. A corporate defined benefit plan has already committed $1 million to this strategy. Midwest has less than $100 million in assets under management.