The initial valuation I found out of kilter, the second one more sensible, but difficult to gauge. They have made massive strides forward the last year, with their technology platform now tried and tested, the relevant approvals obtained in the U.K., USA and Middle East and a good degree of evidence of their performance.
However, all those things are difficult to value as they are somewhat intangible. Furthermore, they have market traction but their initial focus was on HNW individuals as they needed a high minimum investment to make it commercially work, so even though they can demonstrate traction, they cannot yet do so in the D2C space.
Thatās why in my eyes the valuation was high - as it was based on the future potential, whilst they hadnāt demonstrated the model in D2C yet. Therefore, they decided to reduce it to a valuation that is based on what they have currently achieved, rather than what they could achieve.
This can be seen as somewhat odd, or you can view it as being honest and transparent. It depends on your viewpoint.
Having all that said, I still find it an interesting proposition. Most startups launch an MPV and then go to market, but these guys basically build a whole organisation and tech platform that has been proven in B2B2C, and are now adding another go-to-market channel on it. In that sense, they are much more mature - albeit unproven in the D2C channel.
I have also been informed that they are in detailed discussions with IFAs and Family Houses for distribution, and with a VC for further investment. All are progressing well I have been told.
While thatās the ostensible reason, I suspect there was an external stimulus like a large investor they feel they canāt live without who pushed them into this, because I sincerely doubt they would have done this without significant external pressure. Iād suspect this comes from the VC. It just seems odd to me to cave to this pressure at this stage, twice.
First time valuation I can understand but 2nd time reduction spooked me. Looks like they are desperate for certain amount of funding (they already achieved more than 100%) so it is putting me off.
I am not privy to all the inner mechanics, but to me it feels that they realised that they got their first valuation wrong and corrected that, and that perhaps indeed the second revaluation is driven by indeed a large VC investment who perhaps would not be willing to come on board at the Ā£18m valuation. I am postulating obviously.
I think they are looking to create ETFs based on their strategies - I would consider investing in them as I like structured products and the role this can play in a portfolio. I donāt currently invest in any of their products, but I would and am certainly considering it.
Iāve tried it out with Ā£100 for a few weeks. I would want to try it for at least a few months before delivering any sort of verdict, ideally more like a year. I may add a a little more soon to experiment for a year say but would not like to make a judgement on their performance until at least 6 months or so.
The high percentage based fees are my largest concern with putting any significant sum in, but they are mostly based on performance, which reduces the sting. So around 1% once you get to any significant amount + fees based on percentage gain which kick in after 10% gains. Again, hard to judge without investing for a while but clearly based on the 2 and 20 structure for hedge funds.
I think they are an honest attempt at something a little different (bringing quant-style portfolio management to the retail market - they appear to have a mix of technical signals with human supervision as their system), but as a two time investor and now customer testing I feel they have yet to demonstrate that they will be successful at building a successful business but are executing so far. They appear to have toned down the machine-learning side of their pitch and migrated to more mechanical signals analysis, but Iām reassured that they are entirely based on market data (not for example sentiment data from the likes of twitter).
They do have the relevant permissions for managing client money now in multiple countries, which is reassuring. However the app still feels very beta - they have only just updated it with performance tracking, and they havenāt got withdrawal screens into the app yet (they have them in the web app version). They are currently running at 0.2-0.6% growth per day (so in theory lives up to their hype) but thatās over a few days so pretty worthless as a signal, they will of course have down months, but Iām fairly impressed with their back-testing (against real market data), and the 6 months or so of real data they have collected so far which does include both up months and down months but overall is positive. This is over a time of significant market volatility around Dec 2018 and May 2019 so quite a good test of their claims to limit downside. The back-testing is not so useful IMO as it can be gamed fairly easily, and itās over a period of massive growth in markets over the last ten years - the next ten years are not going to look like the last 10 years for anyone.
What I would say is they are significantly different from both ETF-based robo-managers (which I feel are pretty worthless), managed funds, market tracker indexes (available on freetrade), and brokers allowing retail customers to choose their own investments (again freetrade). Perhaps a little like one of these actively managed ETFs I guess, but based on their own tech rather than the instincts of fund managers as the humans are in a more supervisory role. The ETF does also sound an interesting idea (if they manage that), and would be a nice way to try it within the freetrade app as long as fees are low. I also like their ideas about creating tailored funds based on their technology (for example an eco fund) - these would work well as ETFs, though Iād be concerned about the fees.
I hope that is helpful. Worth keeping an eye on I think, but not a service Iād trust with a lot of money as yet.
Iāve been thinking about signing up through the app, but Iām finding it a bit unfinished. For example, thereās no guidance about what documents are acceptable for address or for identity verification. The fees are also laid out confusingly, I think.
I think Iāll leave it for a bit and see if they can iterate on the app a bit. But then Iām quite attracted by your idea of adding a small amount and seeing how it fares.
So, reporting back after a few months - the app is a little more polished, but they havenāt made any huge changes, just small improvements.
One big worry I had early on was that Iād have to report trades for CGT purposes as Iām not using their ISA, but it seems just deposits and withdrawals will count .
The trading platform thus far is delivering fairly steady performance roughly in line with their promises. My small test deposit of 1k is up by 6.6% and steadily growing over a period where the S&P has gone from 3000 to 3000 with lots of volatility. Due to swings on Brexit news my freetrade portfolio is currently up more, but only since last week. I think Iād rather compare over a few years though, and wouldnāt deposit significant money with them before that. Overall Iām pretty happy so far.
Well, they read the signals well and the Friday before the meltdown, everything moved into cash. Happened the month before as well when there was a smaller dip.
System seems to read the market signals quite well, if would have had my money in there rather than in FreeTrade, would have saved me 12% drop.
Thatās actually a really good point. Moving everything in to cash was a great idea and when I saw the email I must admit i thought why would they have done that.
I wish I had thought more about their email, and done the same on my FreeTrade account.
But hey. I am a happy go lucky kind of guy. Whatās the worst that can happen? Well, the biggest meltdown since the global financial crisis, thatās what can happen.
Just have to be careful and not buy the AI-knows-all-answers marketing hype. Itās extremely hard to do in financial trading, despite billions being spent. Look at it as a more of a probability scenario analysis rather than āAIā with machine learning doing lots of simulations on old data before applying it in real life and hoping it does well.
If their model knew what the future has for us, you wouldnāt be hearing from them. Typically, to raise money they say AI, for folks in the software/research industry in tech they say machine learning. Some hedge funds are trying bayesian deep learning models but itās early days. High frequency trading is still the money maker - being faster by milliseconds and front running, that is.
Itās not AI indeed. Itās factie analysis which helps them filter down tons of signals into a few specific ones for that specific day, which a human fund manager interprets and then actions - or not.
Itās not perfect, no model is, but performance so far has been good enough and they went into cash twice before a drop, so there definitely is at least some validity in what they are doing.
Another interesting fact - their portfolio is down 1% YTD, compared to the carnage we see around us, as their model indicated an infliction point and they went all cash before the crash. Theyāre now 30% in trying to pick some winners for the long term.
Someone asked for a performance comparison, so here it is. In the chart you can see the performance of my High Growth account after fees against the MSCI World, S&P 500 and Berkshire Hathaway since June 2019. I have to say I am very satisfied with the performance. They saved me a lot of money in the current crash which allowed me to withdraw money to buy cheap stocks now. As a diversification in the portfolio it has behaved much better than gold, for example. In good times they make some profit and in bad times they protect the funds from going down too much with the overall market.
.
