A spoke fund provides a unique structure where individual accounts are linked to a model portfolio, like a spoke to a hub. When changes are made to the model, the separate accounts are updated to reflect these changes.
“A spoke fund,” said Steven Kiel, president of Arquitos Capital Management, “combines the best aspects of a mutual fund and a separately managed account, and leaves out the worst.”
The Freedom Fund utilizes the spoke fund structure in order to provide significant advantages to clients. Since clients actually own the underlying stock, liquidity risk is greatly reduced. Plus, there is complete transparency. Clients have online access 24/7 to view the holdings in their accounts. Fees are also lower since the vast majority of commissions are waived by the custodian, and there are no hidden fees, like a 12B-1 fee, that mutual funds charge to pay their salespeople.
Kiel is disappointed with the way most mutual funds are marketed and managed. “The mutual fund model is broken. I really think the spoke fund concept will gain traction in the next few years as investors look for money managers who put the interests of investors first. Most mutual fund investors would make a better return simply by buying an S&P 500 index fund, but for those who want to make a higher return, choices are limited. The vast majority of investors don’t have enough money to reach the account minimums for a separately managed account. A spoke fund will allow them to take advantage of the benefits of a more tax-friendly structure and a more focused portfolio at a low cost and a low account minimum. The Freedom Fund will help lead the charge for better managed funds.”
To learn more about the Freedom Fund, visit Arquitos Capital Management’s Web site, located at www.arquitos.com.
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Arquitos Capital Management is an independent, fee-only investment management firm based in Virginia. The firm manages individual, retirement, business, and trust accounts using a conservative, value-oriented investing approach.