Gateway Capital Management was founded in 2013 by Stephen Laszczyk ‘14. The fund’s primary focus is our long/short public equity portfolio, but it also serves as an informal career mentorship program for our partners who have daily interactions with our experienced upperclassman. Alumni relations are an integral aspect of the group’s success. We provide students with the tools they need to successfully place in financial services positions, with 100% placement in fields such as: Investment Banking, Capital Markets, Research, Asset Management, and Sales & Trading.
Our Strategy: 130/30 Long/Short
Gateway Capital Management implements a 130/30 investment strategy. The fund will be short no more than 30% of its value and long no more than 130%, implying a maximum leverage ratio of 1.6 (note that the 30% short position is a cap, not necessarily a target). The fund’s universe is the S&P 500, meaning GCM can only invest, whether long or short, in stocks that are a part of the S&P 500 Index. Our benchmark is the Credit Suisse 130/30 Large Cap Index. An exchange-traded fund that tracks this index is ProShares Large Cap Core Plus (ticker CSM), which according to its prospectus “seeks investment results, before fees and expenses, that track the performance of the Credit Suisse 130/30 Large Cap Index.” The number of investments and weighting of each investment are at the discretion of current GCM members.
We generally follow a top-down approach; members spend considerable time researching various sectors of the S&P 500, and most long investments will come from sectors or industries that we believe will outperform, while most short investments will come from sectors that we believe will underperform. However, exceptions are possible and we may invest in a stock that does not follow this pattern if we believe special circumstances are warranted.
Additionally, the fund is not limited to just value stocks or just growth stocks. Given that up to 30% of the value of our portfolio can be on margin at any time, we face a liquidity constraint in the event of a margin call. In the event that we are fully invested and face a margin call on one or more of our short-sale investments, we will liquidate long positions and use
the proceeds to cover the short.
130/30 – Overview
- Long 100% of assets
- Short 30% of assets
- Cash generated from short positions used to increase long positions to 130% of assets
130/30 – Key Points
- Seeks to increase returns
- Uses shorting to pursue additional performance or control risk
- Greater diversification through broader mix of securities (taking additional positions on unfavorable securities)
- Beta generally near 1.0 (similar risk as overall market)
- Net market exposure = 100% (130% long – 30% short)
- Goal is relative returns (i.e., outperform benchmark in up and down markets)
- During favorable markets, long and short holdings contribute to fund performance
- During unfavorable markets, short holdings cushion losses from long positions
- Considered a core asset
The overarching motivation behind the founding of Gateway Capital Management was to further the career development of its members. Founding members recognized that their peers were incredibly valuable resources in terms of learning more about the industry as well as learning more about internship and job opportunities. Accordingly, GCM serves as an informal mentorship where underclassmen are encouraged to “pick the brains” of members. Additionally, through the interview process to earn a spot in the group, both members and those who are not admitted gain valuable interview practice in a real-life setting that will surely benefit them in future finance interviews.
Market Cap → Greater than the smallest company in the S&P 500
Type of Security → US firm equities, preferably included within the S&P 500 (no ETF’s)