Opening Your Account
Opening a Separately Managed Account for Constantia Capital to manage is a four-step process, which could take as little as half an hour. The instructions below assume you have selected our preferred online broker, Interactive Brokers, but we can work with your preferred online broker.
Follow these 4 steps:
Open the account at Interactive Brokers.
Fund the account.
Sign the Constantia Capital Investment Management Agreement
for the Merger-Arbitrage strategy.
Assign trading authority to Constantia Capital.
Accounts can be opened under individual, joint, trust, or corporate ownership.
More details about the four steps to open your account:
On the Interactive Brokers web site, (www.InteractiveBrokers.com), click on “Open An Account” and choose “Individual, Joint, IRA and Trust”. (Note that IRA accounts cannot use leverage; hence return expectations and fees are reduced.) Fill in all the necessary information - this should take 10 to 15 minutes, as there is a decent amount to fill in. Note that this is your account and comes with SIPC insurance and other protections. Further, although you will be assigning trading authority, you are the only one who has authority to control cash flows into and out of the account.
When asked if you want to use margin, respond "Yes" and select “Portfolio Margin” (for non-IRA accounts). If you have questions, call Interactive Brokers at 1-312-542-6901, or contact us at 1-609-512-1812.
If funding your account from a bank account, wire transfer is best. Give your bank the Interactive Brokers account number in the wire instructions. Mailing in a check also works, but it may take up to 10 days before the funds are available for trading.
An alternative is to fund from a brokerage account. In that case, the best way to is to transfer securities - as opposed to cash - using the “ACATS” system, which you initiate from the Interactive Brokers (receiving) side using the account information of your existing (sending) brokerage account. If you don’t already have stocks that you want to transfer, our suggestion is to purchase SHY (iShares Barclays 1-3 Year Treasury Bond Fund) which typically trades in a very tight range, and has extremely low volatility. When you initiate the transfer, be sure to choose “Partial”, or your whole account will be transferred over. The SHY position will transfer only after it settles, which is three days after you buy it.
The Constantia Capital Investment Management Agreement "IMA" outlines the agreement between you and us, and contains the Investment Guidelines and fees for the Merger-Arbitrage strategy. A sample IMA can be downloaded using the preceding link.
You assign trading authority on the Interactive Brokers website by logging onto their Account Management section. Under the “Add Accounts” tab, click on “Link to Advisor”, and enter the Constantia Capital account number, which is F1177185. For the Advisor name, enter our full legal name, which is "Constantia Capital LLC". Note that Interactive Brokers approves trading authorization requests only on Friday afternoons, so the earliest we can implement our investment strategy is the following Monday morning.
After the account is approved, we recommend converting to a "Portfolio Margin" account. This option is only available for accounts greater than $110,000.
To convert to Portfolio Margin, log onto the Account Management section of your Interactive Brokers account, and under Manage Account, then Trade Configuration, select Permissions, and check Options/United States (although we do not trade options in this strategy, Interactive Brokers requires Options trading approval in order to perform the calculations necessary for Portfolio Margin - their rules, not ours).
Next, also under Manage Account, select Settings, then under Configure Account, select Account Type, and choose Portfolio Margin. Click continue and sign. Approval takes several days.