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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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.
Separately managed accounts offer four principal advantages:
- 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.
- Liquidity: Clients can initiate deposit and withdrawal requests at will, without lock-ups imposed on hedge fund investors.
- 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.
- 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.
Despite their superior transparency and liquidity, managed accounts may have certain drawbacks compared to pooled vehicles:
- 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.
- 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.
- 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.
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.
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.
No. Interactive Brokers is an unaffiliated third party.
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.
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.
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.
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.
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.
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.
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.
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.