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Status Check: Playing the Long Game

Veteran games developer and former KlickNation owner Mark Otero resurfaces with hedge fund Alice Capital

Back Web Only Oct 25, 2019 By Graham Womack

Mark Otero left Electronic Arts and Capital Games, the subsidiary he helped found, with a strict noncompete agreement.

“I couldn’t work on games for a year, and I couldn’t poach staff for a year,” Otero says of his January 2016 exit from the company for which he helped develop “Star Wars: Galaxy of Heroes” and other games. “That’s OK. I had no intention to (make) another game after that.” Instead, Otero says he wanted to “focus on making my algorithm.”

When Comstock’s profiled Otero in 2014 (“Mind Games”), the article noted his path from leaving a financial career at Franklin Templeton Investments to running Midtown Sacramento yogurt shop Mochii to founding KlickNation, which became Capital Games.

“I think that he’s matured a lot in a relatively short period of time,” longtime employee Aaron Nemoyten told Comstock’s in 2014. “This experience would do that to anyone. When I first met him, he was in startup, co-founder panic mode all the time because (KlickNation) wasn’t profitable, and he was dumping money into it from the yogurt shop and working crazy hours. Now, he’s doing stuff with that money and resources and connections.”

Still, something didn’t quite click for Otero after EA Sports purchased his company. “I wanted to start something new,” Otero says. “… I think EA’s a great company. I learned a lot working there, and I think I got from that experience what I wanted to. And I think EA also got what they wanted from me, which was a blockbuster game. I think we were both happy with that. I knew it was my time to exit and start on something new again.”

Some people might have taken the reported $35 million Otero’s company received from EA Sports in December 2011 and decamped to a beach. But that’s not Otero, who stuck around to run the company a few more years before leaving to attempt his next venture.

Mark Otero founded hedge fund, Alice Capital. (Photo by Graham Womack)

Otero and his team have spent more than three years creating a hedge fund. Privately-funded Alice Capital uses an algorithmic process to invest in S&P 500 companies and make automatic trades about 10-20 times per month.

Otero breaks down the returns in Alice Capital’s five quarters so far: First quarter, about 8 percent; second quarter, about 9 percent; third quarter, 3 percent; fourth quarter, 14 percent; and fifth quarter, 10 percent. He says these returns offer an annualized rate of return 3-4 times greater than more traditional index fund investing. 

“When they hear about our numbers, people freak out too,” Otero says. “Like, maybe an index fund does 7-8 percent over many, many years. Some years better, some years worse, right? So when they hear our numbers, they’re natural to be skeptical and fearful.”

The fund has operated without a website to the public, though one is in development. “We’re new,” Otero says. “We’re just coming out of our trial period of 12 months,  and we’re now getting everything buttoned up and that’s a process.”

Much uncertainty exists these days in the financial markets, with talk of an impending recession and the Dow Jones Industrial Average dropping several hundred points certain days. Otero says he doesn’t pay attention to the news, feeding information into his algorithm and letting it do the rest. “I’ve always wanted to do something in the stock market, the financial market, just ’cause I like solving puzzles,” Otero says. “If you think of a game, games are puzzles.”

For now, he’s content to have spent several years playing the long game in creating his hedge fund. “We don’t care about the direction of the market, whether it’s crashing, bull market,” Otero says. “We’ll ride it either way.”

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