Wall Street & Technology: Blog: New Online Investing Site Covestor Presents A Threat to Fund Managers

New Online Investing Site Covestor Presents A Threat to Fund Managers

A new competitor called Covestor has quietly rolled onto Wall Street and is hoping to dine on the lunches of mutual fund and hedge fund managers. "We want to de-institutionalize money management and funds management," says Perry Blacher, director of marketing and co-founder of Covestor. "We're taking on the guys in the big corner offices with wood paneling who rely on people's laziness," he says.

Covestor is like other social networking investment sites, such as Cake Financial, in that it aggregates information about members' investment activity in their various brokerage accounts (in this case, using Yodlee) and lets them share their performance metrics with with others. But this site goes beyond being a way to pick up stock tips or show off one's trading prowess -- it will actually pay investors who perform well.

The way it works is, if a member likes another participant's investment goals and practices, he or she can track that person's portfolio, receiving alerts by email or on the site every time that person buys or sells something (other sites like Cake offer this too). If the member still likes what he sees, he will eventually be able to put money into a managed account to be invested exactly the way the high-performing member (called a "leader") does. Then the leader will receive a fixed data fee based on how many members are following his investments. This is all legal, Blacher says, because Covestor will be a registered investment advisor and members will pay it (not other members) for the advice. Investment advisors are welcome to join the network and use it to broaden their client base, he says.

At the moment, Covestor is a closed network that manages more than $100 million in assets invested in more than 3,000 equities. Within the next few months, Covestor will be open to the public.

Posted by Penny Crosman at 03:44 PM

This is a public forum. CMP Media and its affiliates are not responsible for and do not control what is posted herein. CMP Media makes no warranties or guarantees concerning any advice dispensed by its staff members or readers.

Community standards in this comment area do not permit hate language, excessive profanity, or other patently offensive language. Please be aware that all information posted to this comment area becomes the property of CMP Media LLC and may be edited and republished in print or electronic format as outlined in CMP Media's Terms of Service.

Important Note: This comment area is NOT intended for commercial messages or solicitations of business.

Greg MacSweeny Columns

Greg MacSweeney
A "Slowdown in the Decision Making Process" for Tech Spending
The continuing effects of ongoing economic turmoil have begun to drastically change the wa...

Polish Central Securities Depository Chooses Microsoft BizTalk Server as Financial Messaging Platform

Citi Announces Another Execution to Custody Product Client Win

Pamplona Capital Management Selects Calypso SaaS for New Credit Fund

Larry Tabb Columns

Larry Tabb
Why are we still waiting for the $700 billion bailout?
As debate over the $700 billion bailout continues, Larry Tabb, CEO of TABB Group, comments...

Now Is the Time for Firms to Position Themselves for the End of the Economic Downturn

Clearing and Settlement Top-of-Mind for Front-Office Execs

Risk Management IT Comes to the Forefront in the Wake of Subprime Credit Crisis

CHECK THIS OUT

Novell Real Time Linux Webcast Series
In order to succeed, companies must be able to respond quickly, deliver superior value and quality of service, and carefully manage their costs. In this series of brief webcasts, you will learn how SUSE Linux Enterprise Real Time from Novell enables organizations to respond quicker by delivering low latencies, deliver increased value with fast response times, and better manage costs.