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About Cable Car Capital LLC

Distribution

Fees and expenses

Individual investors

Institutional allocators

Managed accounts

Miscellaneous

About Cable Car Capital LLC

What is Cable Car Capital LLC?

Cable Car is a registered investment adviser founded by Jacob Ma-Weaver in 2013. Cable Car provides discretionary investment management services to individuals, businesses, and institutional investors through separately managed accounts. Please see about the firm for more details.

What are Cable Car’s qualifications?

Cable Car is registered as an investment adviser with the states of California and Texas. While registration does not imply a certain level of skill or training, it allows Cable Car to offer investment advice to the general public in exchange for compensation. Cable Car is also registered with the Commodity Futures Trading Commission as a Commodity Trading Advisor in connection with the accounts of qualified eligible persons

Jacob Ma-Weaver, founder and sole portfolio manager of Cable Car, has more than seven years of investment-related professional experience. He holds a BA in Comparative Literature & Society and Economics, cum laude, and an MA in Statistics from Columbia University. Prior to founding Cable Car, he worked in corporate, long-only, and long/short contexts. He is also a CFA charterholder. Further information about Jacob Ma-Weaver is available on the about the firm page and in Part 2B of the Form ADV brochure.

Does Cable Car manage a “hedge fund”?

No. Unlike a hedge fund, mutual fund, or other pooled vehicle, Cable Car’s client assets are held in separate accounts and are not commingled. However, like many investment firms that also manage pooled funds, Cable Car manages separate client accounts according to a common investment strategy. Cable Car’s investment strategy utilizes many of the same techniques employed by long/short equity hedge funds.

What is Cable Car’s investment strategy?

Cable Car provides a concentrated, hedged approach to value investing. Cable Car seeks to purchase securities when they are priced below intrinsic value and sell or short-sell securities that it believes are overvalued. Cable Car’s portfolio is composed of a small number of investment opportunities that it believes offer the most attractive trade-off between risk and potential returns. Cable Car arrives at its estimate of intrinsic value through rigorous fundamental research, including detailed financial and industry analysis.

Within these broad parameters, Cable Car implements company- and security-specific trading strategies and risk-management techniques designed to reduce exposure to broad market movements and identified risk factors. More information on the firm’s methods of analysis can be found in Item 8 of the Form ADV brochure and on the investment approach page of this website.

Prospective clients are encouraged to read recent commentary on the blog and contact the firm to learn more. Sample investment write-ups are available on request.

Why does Cable Car have a website?

As a registered investment adviser, Cable Car is not restricted from “holding out” its investment management services to the general public. The prohibition on advertising generally applies to funds that are offering limited partnership interests in pooled vehicles to sophisticated investors only. Cable Car values transparency and seeks to provide prospective investors with all information necessary to make an informed investment decision.

It is important that you read the disclaimer located on the bottom of this and every page on this website. Cable Car’s services are not suitable for everyone and can only be formally offered through a written investment advisory agreement.

Who can invest with Cable Car?

Cable Car’s services are available to most US individual investors, trusts, small businesses, corporations, pension plans, endowments, family offices, funds of funds, and other institutions. Cable Car’s custodian can support many account types including individual, joint, trust, qualified pension, IRA, and corporate accounts.

Cable Car may be able to accept clients residing or with primary place of business outside the United States, provided Cable Car may legally provide investment advice in the client’s jurisdiction. In some countries, Cable Car would be required to register with the securities authorities prior to soliciting clients. Cable Car’s services are not available to persons in those countries except in the event of a preexisting relationship or reverse solicitation. This website is not directed to persons in jurisdictions where Cable Car is not registered. Prospective clients from outside the United States should contact Cable Car for further details.

Cable Car’s investment strategy may not be suitable for all investors. Cable Car will first discuss your investment objectives and risk tolerance before beginning a new client relationship.

What is the significance of the firm’s name?

Cable Car is based in San Francisco, with offices on the Powell-Hyde cable car line, an iconic local landmark. Like a cable car traveling over steep hills, ascending at a measured pace and avoiding a precipitous descent, Cable Car aims to achieve absolute returns through both rising and declining markets.

Distribution

Are Cable Car’s services available from third parties?

Yes. While Cable Car encourages prospective clients to establish a direct relationship, certain of its services are available to clients of third-party, unaffiliated investment advisers. Access to Cable Car’s services through a third party may be more appropriate for investors who have established, broader advisory relationships or prefer a more diversified, multi-manager portfolio. Cable Car may act as a subadviser to funds of funds and wealth managers. Cable Car has also entered into a limited licensing arrangement through which it provides trading data to Covestor Ltd. Cable Car’s relationships with third-party investment advisers are non-exclusive and are subject to negotiated terms that may differ from Cable Car’s general mandate. As a matter of policy, Cable Car does not select or recommend third-party investment advisers.

Who is Covestor?

Covestor Ltd is an investment adviser that operates a multi-manager managed account platform. Covestor licenses trade data from investment advisers in exchange for a portion of the management fee charged to its clients. Covestor is a third party unaffiliated with Cable Car that was acquired by Interactive Brokers in 2015.

What is Cable Car’s relationship with Covestor?

Cable Car licenses a subset of its trading data to Covestor on a non-exclusive basis for use in managing Covestor’s client portfolios. Clients of Covestor can subscribe to the Hedged Value model portfolio on Covestor’s website. Cable Car maintains a profile and occasional portfolio commentary on Covestor’s website.

What is the difference between Cable Car’s Covestor model and its primary strategy?

Cable Car licenses only a portion of its trading data to Covestor. At this time, Covestor models are limited to highly liquid stocks listed on US exchanges and do not include non-equity securities. Cable Car’s investments in smaller-capitalization securities, stocks listed on international exchanges, derivatives hedges, bonds, illiquid special situations, and other unsuitable investments are not included in the Covestor model. Covestor, under its sole discretion, may replicate trades in the model portfolio for its clients.

Within these constraints, the investment approach is the same, and the Covestor model portfolio managed by Cable Car is included in the Cable Car Composite. Larger-capitalization, US-listed equity positions held by Cable Car clients will generally be held in the model portfolio, although Cable Car undertakes no obligation to license any particular trade opportunity to Covestor. The performance of the model portfolio since August 22, 2013 includes personal account history that predates the formation of Cable Car Capital LLC. Cable Car’s principals have a beneficial interest in the model portfolio used to transmit trading data to Covestor. In keeping with Cable Car’s trade allocation policy, trades in the model portfolio are placed only after being executed for Cable Car’s other client accounts.

Who should consider subscribing to Cable Car’s Covestor model?

Cable Car manages separate accounts open to individual investors in part out of the belief that all investors should have access to hedged strategies. Covestor has a unique approach that is helping to democratize strategies traditionally limited to private pooled vehicles by offering individual investors access to multiple active managers in a single managed account.

As a matter of policy, Cable Car does not select or recommend third-party investment advisers. However, for investors who desire exposure to other managers or strategies, subscribing to Cable Car’s model portfolio as part of a broader asset allocation strategy could be appropriate.

Are subscribers to Cable Car’s Covestor model clients of Cable Car?

No. Cable Car’s relationship with Covestor is a licensing arrangement. Cable Car’s fiduciary duties are to its clients only. Subscribing to a model portfolio on Covestor does not create a client relationship with Cable Car. Client relationships with Covestor are governed by Covestor’s client agreement.

Can Covestor clients establish a direct relationship with Cable Car?

Yes. Please clearly indicate your status as an existing Covestor client when expressing your interest.

Fees and expenses

What fees does Cable Car charge?

For US investors who are not qualified clients, Cable Car charges a flat annual management fee equal to 3% of the account value, billed daily in arrears by the custodian.

For non-US investors and qualified clients, Cable Car waives the management fee and charges a 30% incentive fee, computed quarterly by the custodian on the net profit and loss in the account and subject to a high water mark of previous performance.

Please see Item 5 in the firm’s brochure on Form ADV for more information.

Management fee Incentive fee
Non-Qualified 3% None
Qualified None 30%

What is a qualified client?

By law, Cable Car may only charge performance-based (“incentive”) fees to non-US investors and US investors who are qualified clients. The SEC has established a net worth threshold of $2 million (excluding primary residence) or $1 million under management with an adviser before the adviser may charge performance-based fees. A higher minimum may apply to pension accounts.

Are Cable Car’s fees negotiable?

Yes, for non-discretionary mandates and large, long-term capital commitments.

What other costs are associated with Cable Car’s investment program?

Clients incur brokerage and other investment expenses in addition to Cable Car’s fees. Clients pay trade commissions, which represent a pass-through of exchange fees, clearing fees, and transaction fees plus brokerage commissions that do not include research-related markups. Client assets are not utilized for research costs; Cable Car bears all research-related expenses directly.

In addition to brokerage costs, clients may incur custody fees, broker interest, minimum activity fees, order cancellation fees, and other costs related to operating and maintaining an investment account. These commissions and fees are charged or passed through by the custodian and not by Cable Car.

How do Cable Car’s fees compare to alternatives?

Cable Car is not the lowest-cost provider of investment advice, and lower fees for similar services may be available elsewhere.

The firm’s fees are generally higher than those offered by index funds, long-only mutual funds, and long-only managed accounts. They are generally comparable to or lower than fees for actively managed “alternative investments” such as long/short mutual funds, long/short managed accounts, and hedge funds. Unlike many mutual funds, Cable Car does not charge sales loads or marketing and distribution (12b-1) fees. Cable Car also does not use client assets to pay for research. The practice of inflating brokerage commissions to pay for research is common in the industry, can lead to conflicts of interest, and adds to client expenses without transparency. Cable Car’s fees are used to support its full-time research efforts, and all research expenses are paid directly by the firm.

Individual investors

Why should I invest with Cable Car?

Cable Car makes an institutional-quality investment product available to individual investors, even if you are not accredited. The firm provides access to the same strategies used by hedge funds through a brokerage account held in your name, with full transparency, no hidden fees, and the ability to make deposits and withdrawals at any time. Cable Car’s strategy provides single-stock exposure and potential downside protection during declining markets that may be difficult to obtain from funds.

Why shouldn’t I invest with Cable Car?

While we welcome new clients, Cable Car’s investment strategy is not suitable for everyone. Cable Car has a limited operating history. As a small business, Cable Car does not have the same resources to devote to research as many of the larger firms with whom it competes.

Investing involves risk of loss, and Cable Car cannot guarantee the performance of its investment program. It is not recommended for individuals with low risk tolerance. Because the investments are long-term in nature, it is not suitable for funds needed for expenditures planned in the next 2-3 years. Cable Car should only be considered within the context of an overall asset allocation. Similar services may be available at lower cost from other firms.

Do I have to be an accredited investor to invest with Cable Car?

No. Unlike hedge funds, which typically require investors to be accredited, Cable Car does not offer partnership interests or other securities to the public.

Does Cable Car offer wealth management or tax advice?

No. Cable Car does not provide advice on clients’ overall asset allocation except to determine whether investing with Cable Car is appropriate. Cable Car may work with outside wealth managers who delegate management of a portion of their clients’ assets to Cable Car. Cable Car is not qualified to provide financial planning or tax advice; clients should consult a qualified tax professional with tax questions.

What are the tax consequences of investing with Cable Car?

In general, Cable Car’s investments will result in reportable capital gains and dividend income. Tax statements are available each calendar year from the custodian. Clients should be aware that certain investment-related expenses, including Cable Car’s management fee, may not be tax deductible. To the extent practicable, Cable Car attempts to minimize the realization of net short-term capital gains in taxable accounts. Upon client request and on a best efforts basis only, Cable Car can make trades in client accounts designed to harvest tax losses or gains.

Cable Car is not qualified to provide tax advice; clients should consult a qualified tax professional with tax questions.

Does Cable Car support IRAs?

Yes. Cable Car’s custodian supports individual retirement accounts. Short selling and leverage are not allowed in IRAs. Accordingly, Cable Car manages IRAs using a modified version of its primary strategy. Short exposure is implemented through options where possible, and IRAs will tend to hold a higher proportion of assets in cash. Cable Car believes the next best alternative to a hedged portfolio is a long-only portfolio with a dedicated cash allocation.

What securities does Cable Car trade?

At present, Cable Car can trade most exchange-listed equities and equity-like products (including common stock, preferred stock, limited partnership interests, closed-end funds, notes, and exchange traded funds), many corporate and government bonds, equity options, mutual funds, and currency conversion in over a dozen currencies. For qualified eligible persons, Cable Car can also trade a variety of futures and futures options. In the future, Cable Car may also be able to trade additional products. For clients who are accredited investors, Cable Car may also make selective investments in private companies.

Why does Cable Car short stocks?

Although short-selling is logistically difficult and increasingly competitive, it is an essential tool to reduce the impact of market downturns on a portfolio. During falling markets, many stocks will decline in price, even those of companies with strong business models. During these times, having capital available to reinvest in high-quality companies can provide an important source of return over the long term. Short positions that increase in value when other positions are declining provide incremental capital when it is needed most.

In normal times, short sales can also generate incremental return by capitalizing on mispricing that results from misunderstandings in the marketplace. Security selection involves recognizing asset prices that can decrease as well as those that can increase. Cable Car does not view short selling as a moral judgement. Although Cable Car sometimes shorts companies it suspects of fraud or malfeasance, short positions often reflect Cable Car’s view that the market’s expectations for an otherwise good business have gotten too high. The activity of short sellers is an important part of fully functioning capital markets.

What is value investing?

Value investing is the philosophy of buying assets below their intrinsic value and selling them above intrinsic value. Traditionally, value investors buy companies at valuations that are either below the net asset value of the company or at a low multiple of the cash flows or earnings the business generates. Recognizing that low-quality or declining businesses may have justifiably low valuations, many value investors are willing to own faster-growing and higher-quality businesses at higher multiples that are nevertheless below intrinsic value.

Cable Car practices value investing, broadly defined. Some of its holdings are “deep value” securities trading below the value of their net assets. Other investments involve stocks whose multiples are low on an absolute basis or relative to the business’ quality and growth prospects. Cable Car also looks for mispricings that arise due to corporate actions such as tender offers, mergers and acquisitions, and other special situations. The main thing its largest investments have in common is some form of downside protection relative to the potential return, whether through valuation, asset value, or cash flows. Like many value investors, Cable Car has a contrarian bias, often preferring investments in lesser-known companies or those that are out of favor in the marketplace.

More information about Cable Car’s investment strategy is available on the investment approach page.

What about indexing?

Many commentators and academics recommend that individual investors buy index funds in order to avoid the expenses of actively managed funds. There is a wealth of academic research demonstrating that actively managed funds, on average, do not outperform the broader stock market after fees. Of course, the performance of the index is determined in large part by the collective decisions of all managers; on average, a large enough group of managers should have performance before fees close to that of the index. It is unsurprising that active management taken as a whole does not appear to add much value relative to an index. The problem for investors lies in identifying consistently skillful managers, whose fees are justified by their performance.

Cable Car believes asset prices are not just random variables and that over the long run, asset prices reflect the value of their underlying cash flows. The stock market is not efficient, and securities are frequently mispriced due to misperceptions, investor psychology, and technical factors. When an index fund indiscriminately purchases all securities in an index, for example, that action can contribute to pricing anomalies. Cable Car’s research is a full-time effort to understand businesses and identify potentially mispriced securities. It is competitive, uncertain, and challenging, but far from impossible. Individuals who believe the task of security analysis is futile are well advised to consider index funds.

For investors who desire exposure to individual securities, researching each investment and managing a portfolio demands the services of a competent investment manager. Indexing is an understandable alternative to attempting to manage a portfolio without devoting energy full-time to investment research. However, indexing limits the potential return to that of the market or a sector, while exposing the investor to potentially undesirable holdings on which no due diligence has been conducted and to unpredictable changes in the direction of the stock market as a whole.

Cable Car cannot guarantee the performance of its security selections; however, the risks and potential rewards of each of its investments are carefully considered and researched. Cable Car does not seek to outperform a particular benchmark, but instead strives to compound capital at an attractive rate of return over time.

Why is Cable Car’s portfolio concentrated?

Cable Car recognizes the limits of a single portfolio manager’s time and attention, and it believes that over-diversification limits the benefits of active management. Cable Car’s fiftieth best idea is unlikely to have as attractive a risk/return profile as its best idea. Cable Car’s portfolio is typically composed of 5-10 long positions and 10-15 short positions.

Concentration means that each individual position has a significant impact on the value of the overall portfolio, whether positive or negative. In recognition of the fact that any investment may not perform as expected, Cable Car has nevertheless established 30% of net liquidation value for a long and 15% of net liquidation value for a short as the maximum size for any one position.

How much should I consider investing with Cable Car?

The most appropriate asset allocation for your particular circumstances depends on your risk tolerance and investment objectives and should be determined in consultation with a qualified wealth manager or financial planner. Because Cable Car makes long-term investments, you should not allocate assets to Cable Car that you plan to spend within the next 2-3 years. For most individual investors, Cable Car should represent less than half of an overall asset allocation due to the portfolio’s concentration.

What are the risks of Cable Car’s strategy?

Investing involves many risks, which prospective clients should understand before investing. In addition to the general risk of loss of principal associated with any investment, Cable Car’s investment strategy introduces risks associated with short sales, leverage, use of derivatives, underlying performance of invested businesses, failures of analysis, investing in international markets, and systemic financial risks, among others.

Prospective clients should read the risk disclosures in Item 8 of the firm’s brochure on Form ADV for the most complete discussion of the risks involved in Cable Car’s investment program.

What is the minimum balance for an account at Cable Car?

For individual investors, the minimum is $50,000. For institutional allocators and qualified clients, the minimum opening balance is $110,000, which is Interactive Brokers’ minimum for Portfolio Margin accounts. Larger minimums apply for custom custody or tax requirements.

Can I deposit or withdraw funds at any time?

Yes. If assets need to be sold to satisfy the withdrawal request, the withdrawal may require 2-3 business days to process.

Institutional allocators

Why should we invest with Cable Car?

Cable Car offers institutions the opportunity to invest alongside an emerging manager with a unique, global perspective and experience at two preeminent value managers. By providing separately managed accounts at a third-party custodian and charging incentive fees only, Cable Car provides complete alignment of interests, full transparency, and on-demand liquidity, along with the security of a significantly larger financial institution. Cable Car also minimizes transaction expenses and avoids conflicts of interest by eschewing soft dollars.

Why shouldn’t we invest with Cable Car?

While we welcome new clients, Cable Car’s investment strategy may not be suitable for all allocators. Cable Car has a limited operating history. The firm cannot guarantee its strategy will perform in line with any particular benchmark, or at all.

As a small business, Cable Car does not have the same resources or staff devoted to research as many of the larger firms with whom it competes. Similar services may be available at lower cost from other firms.

What are Cable Car’s historical returns?

Cable Car reports composite, time-weighted returns for all discretionary accounts it manages. Returns are available since the firm’s registration became effective on November 8, 2013. Cable Car claims compliance with the Global Investment Performance Standards (GIPS).

Past performance may not be predictive of future results.

What is Cable Car’s benchmark?

Cable Car is focused on generating absolute returns, seeking to compound capital above cost over long periods of time. The firm does not consider any index or benchmark in selecting its investments. Because Cable Car considers opportunities internationally, employs a long/short strategy, may use leverage, and does not limit its investments to common equity, its results will likely differ materially from broad market indices in any period.

For the purpose of performance reporting, Cable Car reports the performance of the MSCI All Country World Index alongside the performance of the Cable Car Composite. The ACWI may be representative of the performance of worldwide equity markets.

Due to its short exposure, Cable Car’s portfolio will most likely rise less than the overall market during periods of generally rising equity values and fall less than the overall market during periods of broad-market decline. Due to its concentration, Cable Car’s portfolio may not be less volatile than an index.

 

Who are Cable Car’s service providers?

Cable Car’s prime broker and custodian is Interactive Brokers LLC, an unaffiliated third-party brokerage firm. Interactive Brokers is also responsible for position marks and valuation. Large accounts have the ability to establish other trading or custody relationships as needed. The firm’s legal counsel is Ragghianti Freitas LLP. Cable Car does not presently employ an outside auditor or administrator because all clients hold separately managed accounts at Interactive Brokers. Cable Car’s performance verification and examination reports are prepared by Stonegate International Administration LLC.

Has Cable Car completed a DDQ?

Cable Car will gladly complete a due diligence questionnaire upon request.

Does Cable Car accept non-discretionary mandates?

It depends. Cable Car’s investment advisory agreement provides full discretion over the disposition of client assets. While retaining full discretion, on a case-by-case basis, Cable Car may invest a portion of the account according to client needs outside its primary investment strategy. For example, Cable Car invests a portion of a pension benefit plan differently from its primary strategy in order to satisfy ERISA requirements and the client’s anticipated cash flows.

Does Cable Car support pension plans?

Yes. Cable Car’s custodian can accept qualified pension trust accounts and Cable Car is a bonded ERISA fiduciary. One of Cable Car’s initial clients is a corporate pension plan.

Due to ERISA diversification requirements, Cable Car can either accept full discretion over a plan while agreeing to a directed mandate for a portion of the plan assets, or Cable Car may accept only a portion of the plan assets for management in its primary, concentrated strategy.

Does Cable Car’s strategy incur UBTI for tax-exempt investors?

In general, no. By avoiding investments in certain pass-through entities and maintaining net exposure below 100%, Cable Car does not generally take on acquisition-related debt. However, Cable Car is not a tax adviser and cannot guarantee that its strategies will not result in unrelated business taxable income. Pension funds and other tax-exempt clients who wish to ensure that they avoid UBTI may be able to invest through an offshore blocker corporation.

Does Cable Car impose a lock-up?

No. Clients are free to make withdrawals at any time, with only a few days processing time required if assets must be liquidated to satisfy the withdrawal request. For account closure, Cable Car requests 30-day advance notice.

Why doesn’t Cable Car charge a management fee to institutions?

Cable Car believes the alignment of incentives from performance-based fees is the best compensation model for the industry. The firm’s base 30% incentive fee is chosen so that gross performance in keeping with long-run equity market returns would result in fees comparable to typical management fees in the industry, while under-performance would be penalized and out-performance would be rewarded.

With a self-sustaining business model from management fee-only accounts, Cable Car also wishes to avoid introducing business risk from dependence on management fees from its larger institutional accounts.

Why doesn’t Cable Car use soft dollars?

The industry practice of using inflated brokerage commissions (“soft dollars”) to pay service providers incentivizes excessive turnover, which adds to client expenses and hides the true costs of investing. Cable Car’s principal invests the majority of his investable assets in the strategy and does not have a disincentive to use company funds to purchase research. Instead, Cable Car can be more judicious with its use of research services and avoid distractions and potential conflicts of interest, while minimizing commissions and maintaining full transparency with clients. Cable Car compensates service providers directly using its own funds, not with client assets.

How can we evaluate Cable Car before investing?

Cable Car welcomes initial conversations well in advance of capital commitments. Please get in touch to set up a call to discuss your process. Cable Car can in certain circumstances provide customized reporting and portfolio discussion for prospective clients. Clients can also fund an account with a small trial balance prior to making a larger commitment.

Does Cable Car have a geographic or industry focus?

Cable Car may make investments in companies operating in any industry or region and securities trading in 16 countries. Although Jacob Ma-Weaver is a generalist, proximity and his language fluencies (English, German, and Mandarin Chinese) will lead to more investment opportunities over time in North America, Greater China, and Western Europe. In prior analyst roles, he focused on consumer/retail, telecom services, internet, and healthcare companies. Cable Car consequently is more likely to be aware of potential investment opportunities in these sectors; however, Cable Car avoids excessive concentration in any one sector.

Does Cable Car have market cap or liquidity restrictions?

Cable Car does not restrict its investment universe by market cap and takes advantage of its ability to be nimble where possible. Although Cable Car benefits from better access to management at smaller companies, it also may take advantage of market misperceptions of large, widely followed companies.

How scalable is Cable Car’s approach?

Liquidity constraints and market cap limitations are unlikely to meaningfully impair Cable Car’s investment approach below $50-100 million in assets under management. In the near future, Cable Car has ample capacity to pursue its strategy. As growth dictates, Cable Car may eventually focus more of its research efforts on larger-capitalization companies.

Does Cable Car short individual securities?

Yes. Cable Car does not generally hedge using index derivatives or ETFs except in times of unusual volatility or to reduce a specific, identifiable risk factor.

What are Cable Car’s typical exposure levels?

Cable Car’s gross and net exposure levels fluctuate in accordance with the available opportunity set and valuations in the portfolio. Net exposure may vary between 0-100% but will not fall below zero, in recognition of the long-term upward bias of the stock market. Other than this net long bias, net exposure is not managed to a specific target in advance.

Gross exposure is limited to 200% of client assets. Cable Car may hold cash or be less than 100% invested on a gross basis when opportunities are not compelling or research is still underway on significant new positions.

Are Cable Car’s principals invested with the firm?

Yes. Cable Car manages the majority of Jacob and Annie Ma-Weaver’s discretionary investable assets.

Where can I obtain additional materials about Cable Car?

Please contact Cable Car with further questions, to join the firm’s mailing list, or for a copy of an investor presentation.

Managed accounts

What is the difference between a managed account and a fund?

Each of Cable Car’s clients opens a separate brokerage account with a third-party custodian, which Cable Car manages alongside its other client accounts. Clients delegate trading permissions to Cable Car, but otherwise retain full control over the account. Assets within the account are held in the client’s name.

Mutual funds, hedge funds, and other similar vehicles are pools of capital from multiple investors combined into a single account. Investors own fractional interests in the pooled assets but do not own or control the underlying account.

What are the advantages of separately managed accounts?

Separately managed accounts offer four principal advantages:

  1. Transparency: Clients can view the complete record of transactions and positions held in their accounts at any time. Commissions, fees, and expenses are fully transparent.
  2. Liquidity: Clients can initiate deposit and withdrawal requests at will, without lock-ups imposed on hedge fund investors.
  3. Ownership: Clients maintain separate accounts at an independent, third-party custodian, allowing them to rely on the safety and security of a well-capitalized brokerage firm rather than a small money manager. Cable Car only has trading rights over accounts and does not have access to client funds except for the automatic deduction of its fee. Clients also maintain ownership of the underlying securities held in their accounts, rather than fractional interests in a pooled fund.
  4. Customization: Although Cable Car does not create custom trading strategies for clients, it is possible to restrict specific securities from being traded in an account (e.g. in order to satisfy an employer’s trading restrictions). Upon request, Cable Car can also temporarily liquidate positions for tax purposes.

What are the disadvantages of separately managed accounts?

Despite their superior transparency and liquidity, managed accounts may have certain drawbacks compared to pooled vehicles:

  1. Access: Certain strategies and investment products are only available to institutional accounts or accounts meeting minimum size thresholds. Investors who are not institutions or who have small accounts with Cable Car may not be able to participate in opportunities they could otherwise access through pooled vehicles.
  2. Transaction costs: New accounts must purchase or sell shares in order to match the target portfolio. When opening or closing an account, clients may incur higher per-share commissions to open or close positions than for ongoing trading activity, where commissions are spread over more accounts.
  3. Trade allocation: Due to market conditions, suitability considerations, and rounding, it may not always be possible to allocate every investment opportunity equally to all client accounts. Cable Car attempts to balance trade allocations fairly over time and does not systematically favor any particular account or group of accounts. However, performance across client accounts may diverge, unlike a pooled vehicle in which all interests are proportional.

Do clients have an “account” with Cable Car?

No. Clients hold brokerage accounts at an independent third-party broker-dealer. Clients of Cable Car delegate trading authority over their brokerage accounts to Cable Car.

Who is Interactive Brokers?

Interactive Brokers LLC is an unaffiliated third-party broker-dealer. Cable Car has selected Interactive Brokers as its custodian and prime broker, and it generally recommends that clients establish accounts with Interactive Brokers. Cable Car does not receive any compensation for referring clients and has selected Interactive Brokers following a review of the security, costs, market access, and trading platforms of competing brokerage firms. Please see Item 12 of the Form ADV brochure for more information.

Interactive Brokers LLC is a registered Broker-Dealer, Futures Commission Merchant and Forex Dealer Member, regulated by the U.S. Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA), and is a member of the Financial Industry Regulatory Authority (FINRA) and several other self-regulatory organizations.  Interactive Brokers does not endorse or recommend any introducing brokers, third-party financial advisors or hedge funds, including Cable Car Capital LLC.  Interactive Brokers provides execution and clearing services to customers.  None of the information contained herein constitutes a recommendation, offer, or solicitation of an offer by Interactive Brokers to buy, sell or hold any security, financial product or instrument or to engage in any specific investment strategy. Interactive Brokers makes no representation, and assumes no liability to the accuracy or completeness of the information provided on this website.

More information about Interactive Brokers and its affiliates is available on the firm’s website. Prospective clients are encouraged to review information about Interactive Brokers in more detail before establishing a brokerage relationship.

Is Cable Car affiliated with Interactive Brokers?

No. Interactive Brokers is an unaffiliated third party.

Why does Cable Car recommend Interactive Brokers?

Cable Car does not receive any compensation for referring clients to Interactive Brokers and selected the firm following a review of the security, costs, market access, and trading platforms of competing brokerage firms. Please see Item 12 of the Form ADV brochure for more information.

Cable Car believes that Interactive Brokers offers the lowest cost managed accounts for clients on an overall basis, taking into consideration market access, trade commissions, financing costs, and other expenses. Interactive Brokers does not provide access to every potentially desirable product (support for convertible bonds is notably absent), but it does enable direct market access on a broad set of exchanges around the world at a much lower cost than many alternatives.

Is Interactive Brokers secure?

Cable Car is not responsible for the safety and security of third-party custodians. However, Cable Car also has assets custodied with Interactive Brokers, and Cable Car believes Interactive Brokers to be well-capitalized and well-managed based on its interactions with the firm and publicly disclosed financial data. Funds held with Interactive Brokers may be protected, up to certain limits, by the Securities Investor Protection Corporation.

More information about Interactive Brokers’ security and financial profile is available on its website.

Can Cable Car clients open accounts with a different broker?

At this time, Interactive Brokers is the only brokerage firm at which Cable Car has established trading relationships. However, for accounts larger than $1 million, clients may choose to custody assets with other brokerage firms. Cable Car may reevaluate its choice of managed account platform in the future. Existing clients of other brokerage firms may be able to transfer assets to Interactive Brokers after opening an account using a position transfer.

What currencies may be used to fund an account?

Interactive Brokers currently supports funding in most major world currencies, including USD, EUR, GBP, AUD, CAD, HKD, and offshore RMB. The complete list of 19 different currencies, most of which Cable Car can also trade for hedging purposes, is available here. Cable Car reports returns in the base currency of client accounts, generally USD. On a case-by-case basis, international clients may choose whether or not they wish Cable Car to hedge their net exposure to the USD.

What account information and reporting is available?

As required by law, Interactive Brokers will send a quarterly summary of account performance, transactions, and positions to all clients advised by Cable Car. Additionally, clients may log in to Interactive Brokers’ secure website at any time to view customizable account statements. Clients may view complete transaction details, trade confirmations, expenses, and corporate actions on daily activity statements. Trade confirmations are generally available in real time, while most other activity reports are processed daily. Interactive Brokers also provides portfolio analytics and customer support via email, telephone, and chat.

How are trades allocated among client accounts?

For each trading opportunity, Cable Car first determines the suitability of the trade for each account, which may depend on the account type or size. Cable Car then attempts to aggregate purchase and sale orders for multiple accounts, as doing so typically results in lower commission costs. Cable Car relies on Interactive Brokers’ automated trade allocation software to allocate aggregated orders proportionally among suitable client accounts. Due to market conditions and rounding, this may result in client account performance diverging over time. Cable Car cannot guarantee that every trade opportunity will be allocated equally to all suitable accounts; however, Cable Car attempts to allocate opportunities fairly to clients over time.

When it is not possible to aggregate orders, Cable Car places orders for client accounts before accounts in which its principals have a beneficial interest.

Can I direct trades in my account or restrict certain securities?

Only under certain circumstances. Clients restricted from transacting in certain securities due to employer policy or other relationships may restrict Cable Car from trading those securities in their accounts. For example, Cable Car does not transact in securities of Google (GOOG) for any clients because one of its principals is employed there.

Cable Car otherwise does not allow clients to direct trades; however, it may allow temporary position liquidation for tax purposes upon request on a best-efforts basis. Clients who wish to trade other securities outside of Cable Car’s investment program are encouraged to open a separate brokerage account.

Can I replicate Cable Car’s trades in another account?

Cable Car’s investment advisory agreement prohibits clients from attempting to replicate Cable Car’s portfolio in a larger account in order to avoid Cable Car’s advisory fees. If you disagree with a position held in your account, you are free to take an offsetting position in another account with notice to Cable Car in order to avoid cross trades.

Can I discuss the contents of my portfolio publicly?

No. Just as Cable Car maintains confidential client information in accordance with its privacy policy, Cable Car’s investment strategies and holdings are confidential. Cable Car’s intellectual property shared with clients should not be disseminated publicly except by Cable Car. Cable Car may make exceptions to this policy; please request permission to discuss your portfolio publicly before doing so.

Miscellaneous

What is your view on the market? XYZ stock? ABC asset class?

Cable Car’s portfolio is hedged because the firm is usually agnostic as to whether the market is more likely to rise or fall in the near term, barring extreme valuations and unusual market environments. Over the long term, Cable Car believes there is a cost to equity and that a net long bias is appropriate. Unless it is represented in client portfolios, Cable Car’s view on any particular stock or asset class is not likely to be informative. In no case should anyone rely on any discussion of any security on this website for investment advice. Cable Car’s investment advice is limited solely to the purchase and sale of securities in client accounts.

That said, Cable Car welcomes new ideas and is always happy to discuss any company or security.

What is Cable Car’s typical holding period?

Each position is different. Cable Car always invests with a long-term, multi-year view of a business’ fundamentals in mind, and the firm believes patient investors can take advantage of time horizon arbitrage. However, Cable Car’s investment horizon may vary. In some cases, Cable Car hopes to compound capital continuously in a position for many years. In other situations, a stock may be expected to reach fair value in a shorter period of time. Short positions typically have a shorter time horizon given their less favorable risk/reward dynamic.

Is Cable Car an activist investor?

No. Cable Car’s investments are generally passive in nature. However, Cable Car regularly meets with the management of its portfolio companies and will proactively communicate with management when opportunities for value creation become apparent.

What tools were used to create the website?

This website was built using WordPress and the Customizr theme by Themes & Co., which includes elements of Twitter Bootstrap. The site is hosted using Google App Engine for PHP.