- The investing app Titan promises to provide a low-cost service that lets ordinary traders invest like a hedge-fund client.
- Titan requires users to deposit at least $US500 to gain access to its research and other functions, and charges a 1% annual advisory fee.
- After users open an account and deposit money, Titan automatically invests their capital in a basket of 20 stocks.
- In an effort to reduce risk, Titan uses a portion of its users’ capitals to bet against the benchmark S&P 500 index when markets are in a downturn.
The investing app Titan promises to let ordinary traders invest like a hedge-fund client.
After users open an account on Titan’s mobile app and deposit money, the company automatically invests their capital in a basket of 20 stocks. These stocks are based on the most-popular positions at a group of around 175 hedge funds, based on their 13F filings. The basket is then updated once a quarter.
And just like some hedge funds, the app doesn’t only go long stocks. It has a hedging function that uses a portion of its clients’ capital to bet against the benchmark S&P 500 during downturns, like during the stock-market weakness at the end of last year.
According to Titan’s website, its strategy was down 7.5% from launch in February 2018 through the end of the year, versus a 6.1% drop in the S&P 500. Through the first two months of 2019, Titan’s portfolio is up 15.7%, versus an 11.5% increase in the S&P 500.
The app personalizes the percentage of the portfolio that is hedged, based on the investing style derived from questions it asks users about their risk tolerance. For example, a conservative portfolio has 20% of its value hedged, and an aggressive one has 5%.
Titan requires users to deposit at least $US500 to gain access to its research and other services. It charges a 1% annual advisory fee, but no performance fee. By comparison, many passive exchange-traded funds in the US charge 0.04% or even no annual management fee, while hedge funds have historically charged a 2% management fee plus around 20% of the annual profit.
Business Insider took Titan’s fund-management offering for a spin to see how it works:
The initial application is limited to mobile users. When you click the “join in” button on their website, they direct you to download the app.
You’ll then be asked a handful of standard questions that any brokerage is required by law to ask of a potential customer in order to verify your identity.
Titan asks about your income, net assets, investing experience, and very importantly your investing style, which can be conservative, moderate, or aggressive.
After answering all personal and financial information, Titan asks you to deposit at least $US500 before approving your account.
Titan has no lock-up period, and investors can withdraw their money at any time.
The $US500 minimum fee is a prerequisite to gain access to Titan’s research, fund management, networking events, and other services, co-founder Clayton Gardner told Business Insider.
Once Titan approves your account, you become their client and automatically invest your capital into a portfolio that Titan designs.
Here’s what a user’s portfolio looks like.
The portfolio – a basket of 20 stocks – is the same for every Titan user and is updated once a quarter.
As you can see, the hedge function is off right now since markets are not in a downturn. When markets face extended selloffs, Titan will start to use a portion of the portfolio’s money to bet against the benchmark S&P 500 index to reduce market exposure.
You can change your investing style to customise your portfolio’s hedge level.
Titan personalizes users’ hedge percentage based on the investing style derived from the questions they answer when signing up.
- Conservative = 20% of portfolio value is hedged
- Moderate = 10% of portfolio value is hedged
- Aggressive = 5% of portfolio value is hedged
Users can change their investing style once a month.
Here’s the performance of Titan’s portfolio.
On the left, you can see the performance of my portfolio.
On the right is the performance of all investment portfolios on Titan. Its fund has outperformed the S&P 500 so far this year. Last year, it underperformed the benchmark.
Starting a portfolio gives you access to Titan’s equity-research library.
Titan is like a “smart money manager in the pocket,” co-founder Clayton Gardner said, adding that its users can browse equity-research reports in a very mobile-friendly way.
All the research reports are produced by Titan’s own team.
Titan has thousands of clients, mostly mid-career professionals ranging from 30-35 years old. It had $US20 million under management as of October 2018, according to Gardner.
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