Q2 Wealth & Finance Best Risk-Managed Investment Specialists 2023 & Investment CEO of the Year 2023: Paul Regan Meet the Hedge Fund Manager Delivering Stellar Returns with a Unique Insurance Based Risk Neutralizing Strategy. In investing, we know there is no free lunch. With higher returns comes increased risk. But what if you could neutralize some of the variables that create risk in traditional investing? What if timing or pricing the market, or being right about the direction was no longer necessary for a profitable trading strategy? Meet Paul Regan — a man who has created an arbitrage-based strategy that successfully does exactly that. And his innovation goes far beyond successful trading by pairing an actual insurance policy with each investment. We sat down with Paul to learn more about his unique innovation and new line of funds. Doing The Near-Impossible In the investment world, achieving high returns with low risk is akin to finding the Holy Grail. But, Mr. Regan’s past experience illustrates why he has been able to accomplish this seemingly impossible task of providing certain returns in an uncertain world. He’s been hard at work as a financial engineer for decades. Meanwhile, he has beaten the S&P 500 index for the past 10 years as a trader. More Firsts He is the first hedge fund manager who has successfully gained the support of major insurance carriers who are writing policies exclusively for his fund, Next Level Holdings, LLC. These policies enable him to contractually neutralize market and transactional risk for his investors. This allows the fund to ensure a consistent 24% annual return to those investors who are lucky enough to gain entry into one of his exclusive hedge funds. And that phenomenal yearly return? Guaranteed by the insurers. How Exactly Did He Accomplish This? In today’s challenging market, we find ourselves in complete awe of this accomplishment. Somehow Mr. Regan has brilliantly engineered an arbitrage-based fixed-income product. This has been attempted previously without success. What has Paul Regan done differently? We asked him directly so we could find out. Q. First off, Paul, we understand this is an arbitrage-based strategy. Can you explain arbitrage trading for us? Regan: Of course. Arbitrage is a form of trading in which traders exploit price discrepancies between the same investments in different markets. Arbitrageurs buy in one market while simultaneously selling an equivalent size in a different but related market. They do this to take advantage of price divergences between the two. Sometimes, products that are effectively the same thing, trade in different places or slightly different forms. For example, some large companies are listed on more than one stock exchange. Theoretically, as the shares on each stock exchange belong to the same company, they should be priced equally. However, the flow of information to all parts of the world is not instantaneous. Furthermore, markets do not operate with complete efficiency. When both stock exchanges are open, the share price may differ between them. The first person to notice the price difference could buy the stock on one exchange at the lower price while selling on the other at a higher price. In doing so, they secure a quick profit. I’ve been an arbitrage trader of commodities for decades, so this is my investing backyard, so to speak. Q. Why is your fund different? Regan: The first part of my model is the arbitrage component. There’s minimal risk because I sell first and then buy, but there is always some transactional risk. You can’t get away from it. But the insurance industry was founded to provide guarantees. We rely on insurance to protect our lives: our homes, our businesses, and our health. So this is where my model excels: we rely on insurance to provide a true contractual guarantee. What makes me different is why my investors love me: I succeeded in getting the insurance industry to understand our trading model. Now, these insurers have “priced the risk.” Because I pay them premiums, they are happy to issue coverage. It is important to note that the insurance companies issue the guarantee directly to my investors. It’s not through our fund or our firm. That provides the next level of assurance since the policy is issued in your name. It’s no different from how they would quote your premium for a life or health insurance product. Based on the investment size, we have the insurance carrier directly issue the surety bond in our client’s name. It’s pretty simple, but it’s a new concept in the hedge fund business where losses and wild volatility are the norm. Q. So, to clarify, your guarantee is a separate insurance policy? Regan: Yes, that’s it! The “guaranteed return” policies are issued to our investors directly from licensed and regulated major insurance carriers and not from our firm. I am sure that if we attempted to offer “guaranteed returns” directly, we would run into issues with the SEC and various other regulatory bodies and consumer protection agencies. It wouldn’t be prudent. This is where I came up with the idea to pair my investment offerings with insurance products. That would ultimately give our investors the highest level of assurance and certainty in a very uncertain world. Our insurance is high quality too. All of our surety bonds and insurance policies are issued by Lloyds of London or other firms carrying investment grade ratings from AM Best. Q. Can you tell us a little more about how you were able to partner with these insurers? Regan: Great question! It’s actually what I am most proud of. Most people assume that creating the model is my crowning achievement, but that’s not the case. Getting the insurance industry to bet big on me was a monumental achievement. Everyone in the financial industry knows that the insurance industry is incredibly regulated, conservative, bureaucratic and slow-moving. When I approached insurers, I was immediately subjected to intense scrutiny. I endured several forensic financial audits that spanned over 21 long months. Initially, I was forced to put up eight figures Feb23228
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