Innovation That Matters

Investment account mimics other investors' trades

Financial Services

For many consumers, investing can feel like throwing money into a black box and hoping to see some return on the other side. Aiming to bring increased transparency, personalization and control to the process, Covestor Investment Management has created a new type of account that lets investors follow the trades of the experts with their own managed funds. The new Multi Managed Account (MMA) from CVIM gives clients “access to expert active management like a hedge fund within the security of a managed account,” as the company explains it. Essentially, CVIM has recruited a number of proven individual investors with differing styles to manage investment models for others who would like to replicate them. Consumers begin by depositing a minimum of USD 10,000 with New York-based Covestor Ltd., CVIM’s parent company and a registered investment advisor. They then complete a questionnaire to assess their tolerance for risk, resulting in a risk score that’s used to determine the models they’ll be able to choose from—specifically, those with risk scores equal to or lower than their own. From that set, clients select the particular models/investors they would like to follow and with what proportion of their funds. There’s no limit to the number of models a client can subscribe to, as long as they put at least USD 5,000 toward each. Once they’ve made those allocations, the models they’ve chosen are auto-traded for them, in real time, in their own managed accounts at either TD Ameritrade Holding or Interactive Brokers Group. Clients can manage their accounts at any time using the CV.IM console, which shows their positions, transactions and performance in the models they’re subscribed to. Annual fees range between 0.50 percent and 1.5 percent of subscribed funds. The investors managing the models, meanwhile, are compensated for their data based on the number of subscribers they have attracted. There’s no doubt that mimicking like-minded twinsumers can benefit anyone—whether in choosing a product or in investing funds, where understanding who’s managing those funds also adds a degree of much-needed transparency. In addition, however, CVIM’s MMAs are similar to separately managed accounts, an offering that brokerage firms have traditionally offered only to wealthy clients, according to a Wall Street Journal blog. In other words, the mass class trend strikes again! 😉 Spotted by: Fred Wilson



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