Hedge fund investing is normally reserved for those who have at least a few hundred thousand dollars to invest. You often have to be an accredited investor as well ($1 million net worth or $200 thousand income for the last two years).
Many hedge funds charge high fees. 2% of assets plus 20% of profits are common for hedge funds. For the average Joe or Jane, who has only a few thousand dollars at best to invest, hedge funds are out of the question.
Not so quick. A company named Titan Invest is looking to change how people invest, and you only need $500 to get started. In this article, we’ll tell you who they are and how to invest with them.
- Algorithm-based investing app
- Start with only $500, don't need to be accredited
- Slightly higher management fees at 1.00% AUM
Titan Invest Details
Who Is Titan Invest?
Titan Invest is basically an algorithmic investing platform that acts like a hedge fund. There are five people behind the company, three of whom are co-founders. All have finance experience, and some have worked at hedge funds.
Calling Titan Invest a hedge fund directly is a little misleading. Technically, they are not a fund. They are an SEC-registered investment advisor. You can also say they are a robo-advisor. There are real people doing the actual trades.
“To be very explicit, we are not a hedge fund,” said Clayton Gardner, co-founder of Titan Invest, in an interview with FinancialPlanning. “We’re trying to open the idea of investing in managed portfolios. Some of those portfolios may be managed by software and some may be managed by humans. The idea of having another party managing a portfolio for you is something that is not readily accessible to most folks. And so that’s a really core focus. At the end of the day, we began building Titan for ourselves to solve a problem that we personally faced. I’m 28 years old. And my co-founders are 28 and 30. We’re mid-career professional millennials. And that’s certainly been our biggest source of early clients.”
How Does It Work?
An algorithmic investing platform is one that trades based on algorithms. Titan Invest uses software to analyze filings by large hedge funds. By tracking hedge funds with long-term holdings, Titan Invest tries to follow these same holdings. They have specific criteria for stocks, which include:
- Wide moat
- Strong cash generation
- High returns on capital
- Excellent management
- Attractive growth prospects
Your portfolio with Titan will hold 20 stocks. The portfolio is re-adjusted each quarter where some stocks are removed while others are added.
The hedging part comes in by shorting 0% to 20% of the market based on your risk tolerance. The hedge is meant to minimize drawdowns in the case of a market drop. If the market goes down, the short position should go up in value, offsetting the portfolio’s decline.
Titan Invest is an active manager. You can track how well your investments are doing through their mobile app. In addition to tracking your investments, you also get insightful details about each position and educational videos about what’s going on in the market.
Fees and Terms
Titan Invest charges a 1% wrap fee. This means there are no other fees. The 1% refers to the assets you have under management. For a $10,000 portfolio, the fee is $100 per year. There are no performance fees (unlike a traditional hedge fund that may take 20%).
Unlike a hedge fund, which can lock up your money for months, you can withdraw your money any time. It takes about two to four days to receive it.
Titan Invest currently only supports individual taxable accounts. This is a big drawback. Hopefully they will support IRAs and other account types soon.
They also are able to be integrated into Personal Capital to track your holdings, but not Mint yet.
Is It Worth It?
Titan Invest’s website lists their various performance metrics. They show 2019 year-to-date returns of 26.7% compared with the S&P 500 return of 18.2% (as of 4/30/2019). See Titan's website for full performance disclosures.
Portfolios held by Titan Invest are meant to be long-term. Meaning, years rather than months. If you like watching the market every day or need some of the invested funds within a few months after investing them, Titan Invest may not be for you. If you have a few years for a time horizon and don’t plan to touch any of the invested capital, Titan Invest might be a good place to invest your money.
It's also important to compare them to other similar companies. For example, Emperor Investments is another all-stock platform but has a slightly different methodology and charges less in fees. You also have the traditional robo-advisors like Betterment or Wealthfront.
Is It Safe?
As safe as any other investment service. Titan Invest uses 256-bit encryption security, and your account is also SIPC-insured for up to $500,000. They are an SEC-registered investment advisor with Pillsbury LLP as counsel. Clearing and custody are handled by Third Party Trade and Apex Clearing.
For non-accredited investors who want to see what it’s like to invest in a similar fashion to a hedge fund, Titan Invest might be the closest thing there is to a hedge fund for you.
The idea of following 13F filings from hedge funds is viable. Since Titan Invest is only looking to follow hedge funds with long-term horizons, the 45-day delay on 13F filings should have minimal impact, since these funds are not likely to have rotated out of their positions.
The 1% management cost is higher than a lot of robo-advisors, but if Titan Invest is able to deliver on performance, the fee may be worth it.