As of October 2018, Cable Car Capital LLC no longer accepts new separately managed account clients. Cable Car manages a private investment partnership, The Funicular Fund, LP, which is available only to accredited investors. The FAQ below presently describe the old separate accounts structure. New FAQ are forthcoming.
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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.
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.
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.
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.
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.
Cable Car will gladly complete a due diligence questionnaire upon request.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Yes. Cable Car manages the majority of Jacob and Annie Ma-Weaver’s discretionary investable assets.
Please contact Cable Car with further questions, to join the firm’s mailing list, or for a copy of an investor presentation.