SecProbe.io

CORRESP
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Filed
VIA EDGAR

January 4, 2022

U.S. Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

Attention: Mr. Michael Rosenberg

Re: VELA Funds

File Nos. 333-239642 and 811-23585

Dear Mr. Rosenberg:

This letter responds to comments of the Commission’s
staff (the “Staff”) on Post-Effective Amendment No. 1/Amendment No. 3 (the “Amendment”) to the Registration Statement
on Form N-1A (the “Registration Statement”) for VELA Funds (the “Trust” or the “Registrant”) filed
on November 12, 2021 with respect to the following three series of the Trust: VELA Small Cap Fund, VELA Large Cap Plus Fund and VELA International
Fund (each, a “Fund” and collectively, the “Funds”). The purpose of the Amendment was to disclose certain changes
to the information provided in response to Item 3 of Form N-1A and certain information pertaining to material agreements. We have revised
relevant portions of the Registration Statement in response to the Staff’s comments.

Set forth below are the Staff’s comments and
the Registrant’s response to each comment:

PROSPECTUS

Fees and Expenses of the Funds

 1. In accordance with the Franklin Templeton
Group of Funds, Staff No Action Letter (July 23, 1997), please confirm the following with respect to the proposed amended and restated
Investment Advisory Agreement (the “New Advisory Agreement”) and the proposed changes to the fee structure with respect to
the Funds: (1) the personnel providing administration services to the Funds will remain the same; (2) the aggregate advisory and administrative
fee rate payable by each Fund under the New Advisory Agreement would not exceed the aggregate fee rate payable by each Fund under the
existing Investment Advisory Agreement; (3) the Board of Trustees (the “Board”) of the Trust, including a majority of the
Independent Trustees of the Trust, has approved the New Advisory Agreement; (4) the Trust will provide written notice of the New Advisory
Agreement to the existing shareholders of the Funds; and (5) the New Advisory Agreement will be filed as an exhibit to the next Post-Effective
Amendment/Amendment to the Registration Statement.

RESPONSE: In accordance with the
Franklin Templeton Group of Funds, Staff No Action Letter (July 23, 1997), the Registrant confirms the following with respect to the New
Advisory Agreement and the proposed changes to the fee structure with respect to the

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Funds: (1) the personnel providing
administration services to the Funds will remain the same; (2) the aggregate advisory and administrative fee rate payable by each
Fund under the New Advisory Agreement would not exceed the aggregate fee rate payable by each Fund under the existing Investment
Advisory Agreement; (3) the Board, including a majority of the Independent Trustees, has approved the New Advisory Agreement; (4)
the Trust will provide written notice of the New Advisory Agreement to the existing shareholders of the Funds by filing the Funds' updated Summary Prospectuses, Prospectus and Statement of Additional Information ("SAI") with the Commission and
mailing the Funds' updated Summary Prospectuses to the Funds' shareholders; and (5) the New
Advisory Agreement will be filed as an exhibit to the next Post-Effective Amendment/Amendment to the Registration Statement.

 2. Pursuant to Instruction 3(c)(iii) to Form N-1A, please revise the fee table for each Fund to include subcaptions
that identify the expenses comprising “Other Expenses,” including, among other items, “Administrative Fees,” “Interest
Charges and Dividend Expenses” and “Acquired Fund Fees and Expenses,” to the extent applicable.

RESPONSE: The Registrant will revise
the fee table for each Fund accordingly. Please see Appendix A for an amended and restated fee table for each Fund.

 3. Pursuant to Instruction 3(f)(i) to Form N-1A, if a Fund invests in shares of one or more “acquired
funds,” please add a subcaption titled “Acquired Fund Fees and Expenses” to the Fund’s fee table including such
fees and expenses.

RESPONSE: The Registrant will revise
the fee table for each Fund accordingly. Please see Appendix A for an amended and restated fee table for each Fund.

 4. Please include footnote disclosure with respect to any contractual waivers or expense limitation agreements
in effect between VELA Investment Management, LLC (the “Adviser”), the Funds’ investment adviser, and the Funds.

RESPONSE: The Registrant confirms
that there are no contractual waivers or expense limitation agreements currently in effect between the Adviser and the Funds.

 5. The Staff notes that the Registrant refers to the non-management fee to be paid by the Funds as a “unitary
fee” throughout the Prospectus and the SAI. Please revise the disclosure to
characterize the non-management fee to be paid by the Funds as something other than a “unitary fee.”

RESPONSE: The Registrant will change
the references from “unitary fee” to “administrative fee” in the Prospectus and SAI.

 6. Pursuant to Instruction 3(d) to Form N-1A, please include a footnote to the fee table for each Fund disclosing
that the “Management fees” and “Other expenses” in the fee table have been restated to reflect current fees.

RESPONSE: The Registrant will revise
the fee table for each Fund accordingly. Please see Appendix A for an amended and restated fee table for each Fund.

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Principal Investment Strategy and Principal
Risks

 7. With respect to the VELA Large Cap Plus Fund, please revise the Fund’s investment strategy to indicate
that, conversely, using short sale proceeds to increase the Fund’s long exposure can result in greater losses to the Fund if both
positions decrease in value or if losses in the long position exceed any gains on the short position.

RESPONSE: The Registrant will revise
the Fund’s investment strategy accordingly. The revised disclosure will read as follows:

The fund will sell securities short. Short
sales are effected when it is believed that the price of a particular security will decline, and involves the sale of a security which
the fund does not own in hopes of purchasing the same security at a later date at a lower price. Additionally, the fund may sell a security
short if the fund managers expect the security to underperform a relevant benchmark and/or long positions in the portfolio. The fund may
also sell securities of exchange traded funds (“ETFs”) short to hedge its exposure to specific market sectors or if it believes
a specific sector or asset will decline in value. Using short sale proceeds to invest in a long position with a higher expected return
increases the fund’s long exposure and can result in a positive net return even if the security sold short increases in price as
long as the long position outperforms the short position inclusive of all fees and dividends associated with the short sale. Conversely,
using short sale proceeds to increase the fund’s long exposure can result in greater losses to the fund if both positions decrease
in value or if losses in the long position exceed any gains on the short position. To make delivery to the buyer, the fund must
borrow the security, and the fund is obligated to return the security to the lender, which is accomplished by a later purchase of the
security by the fund. The frequency of short sales will vary substantially in different periods, and it is not intended that any specified
portion of the fund’s assets will as a matter of practice be invested in short sales. The fund will not make a short sale if, immediately
before the transaction, the market value of all securities sold short exceeds 40% of the value of the fund’s net assets.

 8. With respect to the VELA Large Cap Plus Fund, please include a principal risk associated with the Fund’s
long-short strategy.

RESPONSE: The Registrant will include
the following new risk as a principal risk for the Fund:

Long/Short Strategy Risk. In situations
where the fund takes a long position (i.e., owns a stock outright), the fund will lose money if the price of the stock declines. In situations
where the fund takes a short position, the fund will lose money if the price of the stock increases. It
is possible that the fund’s long and short positions will not perform as expected and losses on one type of position could more
than offset gains on the other or that the fund will lose money on its long and short positions at the same time. To the extent the fund
uses the proceeds from short positions to increase the fund’s long positions, the fund could experience greater losses if both positions
decrease in value or if losses in the long position exceed any gains on the short position.

 9. Please consider whether each Fund should include “Large Cap Company Risk” as a principal risk.

RESPONSE: The Registrant will include
the following new risk as a principal risk for each Fund:

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Large Cap Company Risk.  Returns
on investments in securities of larger companies could trail the returns on investments in securities of smaller and mid-sized companies.
Larger companies may be unable to respond as quickly as smaller and mid-sized companies to competitive challenges or to changes in business,
product, financial, or other market conditions. Larger companies may not be able to maintain growth at the high rates that may be
achieved by well-managed smaller and mid-sized companies.

 10. Please explain to the Staff why “Small Cap Company Risk” and “Mid Cap Company Risk”
are included as principal risks, but such investments are not specifically described in each Fund’s investment strategy.

RESPONSE: The Registrant
notes that the “Principal Investment Strategy” for the VELA Small Cap Fund provides as follows:

The fund, under normal
market conditions, invests at least 80% of its net assets in U.S. equity securities with small market capitalizations that the Adviser
believes are undervalued. Equity securities consist of common and preferred stocks. Small cap companies are defined by the fund as
companies with market capitalizations in the range of those market capitalizations of companies included in the S&P 600 Index at the
time of purchase.

The Registrant will revise the “Principal
Investment Strategy” for the VELA Large Cap Plus Fund and the VELA International Fund to clarify that each Fund may invest in small
capitalization and mid capitalization companies. The revised disclosure will read as follows:

VELA Large Cap Plus
Fund:

The fund, under normal
market conditions, invests at least 80% of its net assets in long and short positions in U.S. equity securities with large market capitalizations.
The fund will: (i) invest its assets in U.S. equity securities of companies with market capitalizations within the range of the market
capitalizations for the S&P 500 Index that the Adviser believes are undervalued and (ii) sell short U.S. equity securities with market
capitalizations within the range of the market capitalizations for the S&P 500 Index that the Adviser believes are overvalued or have
worse prospects than other investment opportunities. Equity securities consist of common and preferred stocks. The capitalization range
of the S&P 500 Index is between $[2.7] billion and $[2.2] trillion as of September 30, 2021. The size of the companies included in
the S&P 500 Index will change with market conditions. In addition, the fund may, under certain circumstances, invest in securities
of small and mid capitalization companies. Under normal market conditions, the fund intends to maintain its net exposure in the
range of 80% - 100% (long market value minus short market value). However, the long and short positions held by the fund will vary in
size as market opportunities change. The fund’s long positions and their equivalents will generally range between 100% and 140%
of the value of the fund’s net assets. The fund’s short positions will generally range between 0% and 40% of the value of
the fund’s net assets.

VELA International
Fund:

The fund, under normal market conditions,
invests its assets primarily in non-U.S. equity securities of companies of any size (including small capitalization, mid capitalization
and large capitalization companies) that the Adviser believes are undervalued.

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 11. The Staff notes that the VELA International Fund includes a “Non-U.S. and Emerging Markets Risk”
as a principal risk. Please revise the disclosure so that the “Emerging Markets Risk” appears as a separate, stand-alone risk
in the Prospectus.

RESPONSE: The Registrant
will revise the Fund’s principal risk disclosure accordingly. The revised disclosure will read as follows:

Non-U.S.
and Emerging Markets Securities Risk. The fund may invest in non-U.S. securities and U.S. securities
of companies domiciled in non-U.S. countries that may experience more rapid and extreme changes in value than a fund that invests exclusively
in securities of U.S. companies. These companies may be subject to additional risks, including political and economic risks, civil conflicts
and war, greater volatility, expropriation and nationalization risks, currency fluctuations, regulatory risk, higher transaction costs,
delayed settlement, possible non-U.S. controls on investments, and less stringent investor protection and disclosure standards of non-U.S.
markets. In addition, the potential departure of one or more other countries from the European Union may have significant
political and financial consequences for global markets. These risks are magnified in emerging markets, as events and evolving
conditions in certain economies or markets may alter the risks associated with investments tied to countries or regions that historically
were perceived as comparatively stable becoming riskier and more volatile.

Emerging
Markets Risk. Many of the risks with respect to non-U.S. investments are more pronounced for investments in issuers in developing or emerging
market countries. Emerging market countries tend to have more government exchange controls, more volatile interest
and currency exchange rates, less market regulation, and less developed economic, political and legal systems than those of more developed
countries. In addition, emerging market countries may experience high levels of inflation and may have less liquid securities markets
and less efficient trading and settlement systems.

Management of
the Funds

 12. Please revise the disclosure to include the date that the New Advisory Agreement became effective and
that the Funds began paying a separate management fee and a separate administrative fee. Please also revise the disclosure to clarify
that, prior to the effective date of the New Advisory Agreement, the Funds were paying a “unitary fee”.

RESPONSE: The Registrant will revise
the disclosure accordingly. The revised disclosure will read as follows:

Pursuant to the Amended and Restated
Investment Advisory Agreement, dated as of January 12, 2022 (the “Advisory Agreement”) between the Adviser and
the funds, the Adviser, subject to the supervision of the Board and in conformity with the stated objective and policies of each fund,
manages both the investment operations of the funds and the composition of the funds’ portfolios, including the purchase, retention
and disposition of securities. In connection therewith, the Adviser is bound to keep certain books and records of the funds. The services
of the Adviser are not exclusive under the terms of the Advisory Agreement and the Adviser is free to, and does, render management services
to others.

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Pursuant to the Advisory Agreement,
effective as of January 12, 2022, the Adviser charges a management fee and a unitary an administrative
fee, which is designed to pay substantially all the funds’ expenses and to compensate the Adviser for providing services
for the funds, as set forth below:

    Fund
    Management Fee

Percentage of Average Daily Net Assets
    Administrative
Unitary Fee

Percentage of Average Daily Net Assets