To verify that their trades are real, the model managers are trading in a new account. "We capture the information from their trades in real-time. We screen it for suitability and then send it to your managed account for reconciliation," explained Blancher. When the manager executes a trade, it takes on average about two minutes (including the suitability checks) for the entire replication process to be in the investor's managed account.
"It's a bit like an open-source hedge-fund. Anyone can come in and compete and offer their services. Unlike the expensive UMAs, there aren't a lot of middlemen taking charges here. It's a straight management fee," said Blacher.
Investors pay a fixed management fee that varies by strategy, which is typically between 0.50 percent and 1.5 percent. CVIM rewards the managers who are RIAs from this money. "We only charge you on the actual subscription that you make," said Blancher, noting that investors are not charged a fee on the money sitting in cash. "It's really about being a sort of fair honest, open accountable way of doing investment management," said Blacher.
If the managers are individuals, then CVIM pays the $120 a year per subscriber that follows their model. "If they are regulated we share the fees," he explained.
Blacher compares CVIM to the mutual fund supermarkets that many online brokers such as Schwab and Fidelity have created. "Covestor is a similar mechanism to offer the investor this wide range of portfolios to invest in. It's also a distribution mechanism that never existed before for the portfolio manager, he said. Just as the mutual fund supermarket platform helped the portfolio managers build a following, through this platform professional managers and individuals can attract subscribers. The difference is that with a mutual fund, investors cannot see what the portfolio manager is doing everyday and mutual funds charge higher fees and are expensive to set up, he said. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio