The Path To Managing Money
Every investment firm in the world would thank their lucky stars to have just one manager with a track record like yours on their roster.
There are over 1,600 marketocracy funds that beat Morningstar's top performing mutual fund manager for the past 10 years, over 2,800 who outperformed the top mutual fund manager for the past 5 years, and over 1,000 for the past 3 years. My goal is to get as many of you vetted so together we can offer the public a broad selection of skilled managers with different investment styles, all of whom have outperformed most if not all of our mutual fund competitors.
Together we can do a better job for our clients, friends, and family than the existing investment management industry does now and attract a good chunk of the $15 trillion in assets that is currently in the hands of managers whose track records are less impressive than yours.
The traditional career path leading to a portfolio manager position typically requires an MBA from a top business school, and at least 5 years working as an analyst without the power to make your own investment decisions. The cost of attending a top business school is north of $40,000 a year, and changing jobs to work as an analyst for several years carries a significant career risk because only about 1 in 5 analysts ultimately makes it to become a portfolio manager.
With your track record, you could successfully navigate the traditional path to managing money. However, you'll find Marketocracy's path to be more attractive.
You see, you don't need an MBA to be a great money manager, and you don't need me or anyone else to second guess your investment decisions. The investment process with which you produced your track record is what I want you to continue to execute for yourself, your friends and family, and our clients. But I need to know that you believe in your own strategy, and that those who know you best believe in you, before I can recommend you to our clients and readers at Forbes.
Since I already know your track record, the single most important question I want to ask you is this; Will you invest in your own model portfolio? Just as no one will eat at a restaurant where the chef will not eat his own cooking, no one will invest in a fund in which its own manager will not invest.
My greatest fear is introducing our clients and Forbes readers to a manager who thinks this is just a game. I've made that mistake before, and I don't want to repeat it. I have learned the hard way that the best way to tell if you believe in your investment strategy is ask you to invest in it.
Although you probably are managing your own IRA and other brokerage accounts, these accounts are not invested in the same portfolio in which we would be asking others to invest.
In order to make it easier for you to start a real-money track record wth a GIPS® composite that can be used for marketing, Marketocracy Capital Management, LLC (MCM), our affiliated registered investment advisor, has reduced its minimum account size to $20,000 for you and your friends and family.
Because we need your GIPS® composite to reflect a normal client's experience, your account must pay the same fees as would any client. At present, for accounts less than $250,000, MCM's annual management fee is 1.50%. In addition, FOLIOfn -- the brokerage firm where your account will be domiciled -- charges a brokerage fee of 0.40% with an annual minimum of $200. Of course, if you would like to invest more than $250,000 in your model portfolio, the fees would come down.
We use FOLIOfn because their fee structure and the ability to hold fractional shares enables us to match your model's performance very closely. It also enables our clients to make deposits or withdrawals in small amounts.
Example: Say your portfolio has 20 positions in it. If you add $1000 to your account you would need to make 20 trades to keep the account in sync with your model. If you paid $10/trade, your commissions would be $200 or 20% of your transaction.
If you are currently paying retail commissions and fees to manage your own brokerage and/or IRA account, its possible that this account will save you money and open up a new career option for you at the same time! If your Marketocracy model portfolio has outperformed your brokerage or IRA account, you may even get better returns.
Since your track record, up to now, is for a model portfolio, prospective investors want to know how their returns will compare. This chart is for just one manager's model, but it is representative of several key features of all of our composites.
Our goal is for the composite to match your model's returns. However, the model return is after deducting a management fee of 1.95% and trading commissions of 5 cents per share. At FOLIOfn, the smallest client will pay a total of 1.90% combined management and brokerage fees. This means there is a slight bias in favor of the client. The bias is larger for models that require a lot of trading and for larger client accounts that pay lower fees.
Inside every family and social circle there is one person everyone goes to with questions about investments, and you probably are (or should be!) that person.
But, lets face it, being an unofficial advisor is a thankless job. If you talk about a stock that doesn't do well, you can bet that those who bought it will not let you forget it even if your other stock picks did well. People have a long memory for your losers and often forget to give you the credit for your winners.
Your track record tells me that you could do a great job for your friends and family if they bought all of the stocks in your model portfolio instead of letting them cherry pick your ideas and then relying on you to tell them when to sell.
When you start your GIPS composite, we will set up a web page where your friends and family can see your track record and make it easy for them to follow all of your recommendations by investing alongside you. Click here to see an example.
We have the data to present your model, it's track record, and your GIPS® composite in their best light. But, it will be up to you to describe your investment strategy, provide commentary as often as you see fit, and to tell everyone who is already following you informally through your various social circles (Facebook, LinkedIn, Twitter, etc.). As a reminder, to make it easier for your friends and family to help you get started, MCM will reduce the minimum account size for them to $20,000.
When the people who know you best find your investment presentation to be compelling at the $20,000 level, it is likely ready to be shown to our clients and the public.
Forbes is the premier brand name in the financial media. Forbes Digital reaches over 68 million unique visitors each month, and the print version reachs over 6 million. Through my Forbes column, we can regularly reach a very large audience.
My column explores issues I deal with every day to find great investors and to put them to work to achieve our clients’ financial objectives. Here are a few of the topics I would like to write much more about.
These articles explain my search for the next Warren Buffett. Even if Buffett is one in a million, there ought to be more than 1. Where are the other Warren Buffetts? Read More...
These investors have stood the test of time. These articles explain how they did it, and the key decisions they made along the way. Read More...
Great managers do not have the same conviction about all the stocks in their portfolio. When pressed for their “Best Idea,” these are the stocks the Masters named. Read More...
U.S. laws make a distinction between investment advisors and publishers of investment newsletters. Investment advisors are generally required to comply with registration requirements at both the federal and state level. Publishers of investment newsletters, however, are generally not considered to be investment advisors, and therefore do not have the same registration requirements.
Our Masters Contract is designed to enable us to work with those of you who are not registered investment advisors. If you are a registered investment advisor, we can work with you under our Service Advisor Contract.
Our Masters Contract pays you to provide an investment newsletter for our clients which will consist of the daily portfolio holdings of your Marketocracy model portfolio. To deliver your newsletter, you need do nothing more than continue to manage your model portfolio on Marketocracy's website. We will pull the data we need directly from our database.
We use this information to run your model at FOLIOfn so that client's of MCM can choose it as an investment option in their separately managed accounts.
Your compensation for your investment newsletter service is 30 basis points annually on the assets invested in your model. This means that at $100 million in assets, your annual payment would be $300,000. At $10 million, it would be $30,000. At $1 million, $3,000.
The Services Advisor Contract pays you 25 basis points annually on the assets your clients invest in any of the model portfolios we have available on FOLIOfn, not just your own portfolio. This payment does not stack on top of the 30 basis points paid under the Masters Contract because that contract is designed for those who are not registered investment advisors.
The last mutual fund company I started, Firsthand Funds, attracted $8 billion in assets at its peak, and we have more investment talent at Marketocracy than Firsthand ever did.
The reason I started Marketocracy was to find the rare managers, like you, who have the skill and passion to perform well for their families so we can offer our clients a better selection of managers than any mutual fund company can possibly hope to match. The ball is now in your court.
If you can answer yes to these questions, I would be honored to have you on my team. If you want to discuss, please reserve a spot at one of the two conference calls we've set up to answer your questions.