Fund

ACM RESIDENTIAL REAL ESTATE FUND

Adkins Capital Management (ACM)
Residential Real Estate Fund (REF) – Model Portfolio Overview

The ACM Residential Real Estate Fund (REF) is a professionally managed model portfolio designed to provide sophisticated investors with targeted exposure to the U.S. residential real estate sector. By utilizing the REF model portfolio, investors gain diversified access to a broad spectrum of residential real estate assets, including mortgage-backed securities, single-family homes, rental properties, multifamily apartments, student housing, and manufactured housing across the United States.

Structured as a hedge fund-of-stocks-and-funds, the model REF portfolio is constructed using a blend of actively managed mutual funds, passively managed exchange-traded funds (ETFs), real estate investment trusts (REITs), and publicly traded homebuilder equities. The portfolio employs a strategic asset allocation consisting of 60% equity securities and 40% fixed income securities. This allocation is enhanced by a tactical asset allocation overlay, which facilitates periodic rebalancing to optimize risk-adjusted returns in response to evolving market conditions.

Risk Management and Portfolio Insurance Strategy

The REF model incorporates a dynamic portfolio insurance strategy based on a disciplined hedging framework designed to mitigate downside risk while preserving upside potential over a defined investment horizon. When the hedging strategy is active, the value of the Fund’s long put option positions and its underlying securities may move in opposite directions; however, the portfolio maintains a consistently positive net delta. This quantitative characteristic ensures that while the put options reduce the portfolio’s sensitivity to adverse price movements, the long positions in equities and fixed income securities preserve overall positive directional exposure.

Under the hedging protocol, investment risk is effectively limited to the difference between the underlying security prices and the put option strike prices, adjusted for option premiums and transaction costs. The Fund’s total value is designed to appreciate when underlying asset prices increase and to decline—within defined parameters—when prices fall. Importantly, the model REF Fund retains unlimited profit potential, as the long equity and fixed income holdings are capable of indefinite price appreciation.

The Fund distinguishes between two types of hedging implementation:

Ex-ante Portfolio Insurance: Employed when short-term residential real estate market sentiment is bearish, but long-term fundamentals remain constructive, to protect equity positions.

Ex-post Portfolio Insurance: Utilized to mitigate prepayment and extension risks within the fixed income segment, recognizing the lagged effect of macroeconomic data on mortgage-backed securities. Notably, the Fund does not hedge against default risk in its fixed income holdings, as the underlying mortgage-backed securities carry explicit or implicit guarantees from the U.S. government.

The Fund does not pursue full downside protection, as complete hedging would impose prohibitive costs that undermine the potential for alpha generation. Furthermore, put options may not be available for all underlying securities. When fully implemented, the hedging strategy is intended to limit maximum portfolio losses to approximately 10%, providing efficient and effective downside protection, albeit at a premium cost.

Investment Research and Due Diligence

ACM conducts rigorous qualitative and quantitative due diligence on every security included in the REF model. Ongoing research across the residential real estate investment universe ensures that any adjustments to the portfolio are made with the objective of enhancing the Fund’s risk-return profile. This disciplined approach optimizes security turnover, trading costs, and tax efficiency. The combination of strategic and tactical asset allocation, the fund-of-stocks-and-funds structure, high-quality underlying investments, and a dynamic hedging strategy is designed to deliver the risk-managed performance expected by investors over a suitable investment horizon.

Investor Benefits and Service Model

As a forward-thinking investment manager, Adkins Capital Management is committed to operational transparency and investor alignment. Key attributes of the REF offering include:

Exclusive, comprehensive exposure to the U.S. residential real estate industry.

Fully disclosed investment guidelines, holdings, and performance.

Liquid holdings with no lock-up period.

Access to low-cost mortgage-backed securities funds.

Competitive, transparent fee structure with a prepaid annual invoice.

A performance-based fee rebate if the Fund’s calendar-year return is negative.

Clearly defined and controlled investment risks.

A focus on generating attractive, long-term investment performance.

Investment Eligibility and Account Structures

For investors with $1 million+ USD: ACM offers a flexible structure wherein investors establish an account with a brokerage firm of their choice and grant ACM discretionary trading authority to replicate the REF model portfolio. Investors retain exclusive control over deposits and withdrawals, while the brokerage firm provides custody, recordkeeping, compliance, and IRS reporting.

For investors with $50 million+ USD: ACM establishes separately managed accounts (SMAs) held in trust with an independent custodial banking institution selected by the investor. In this structure, ACM assumes full responsibility for investment management, front-office functions, and back-office administration.

By leveraging ACM’s independent third-party brokerage platform or its separately managed account program, institutional and high-net-worth investors gain access to a cost-effective, transparent, and expertly managed residential real estate investment strategy. The ACM REF model reflects the firm’s deep domain expertise, rigorous security selection, continuous portfolio monitoring, and time-tested risk management discipline.