Competition in the Canadian robo-advisery market is now creeping across the border as a U.S. player opens its doors to international clients.
Hedgeable Inc., based in New York, joined the retail robo-advisery world in January, 2014. Since then the company has grown to $500-million (U.S.) of assets under administration.
Now the firm is looking to expand outside its U.S. borders and has opened its platform to investors in both Canada and the United Kingdom.
The robo-advisery business has been rapidly growing over the last year. As of December, 2014, robo-advisers in the U.S. held $19-billion (U.S.) in assets under management, according to a report by Corporate Insight, a market research firm.
Growth hasn’t been as aggressive in Canada, but a number of Canadian players have joined the space in the last year, including WealthBar Financial Services, Nest Wealth Asset Management Inc. and Wealthsimple Financial Inc.
Hedgeable was co-founded by twin brothers Michael and Matthew Kane. The duo aren’t new to online portfolio management after spending the last five years providing a similar service directly to financial advisers and institutions.
International clients on the Hedgeable platform do have to pay slighter higher fees, and hold a higher minimum account size, than the platform’s domestic accounts. Canadians will need $25,000 to open an account and are charged a flat fee of 0.75 per cent of total assets.
Canadian platforms average around 0.25 per cent to 0.6 per cent with account minimums around $5,000.
Similar to most robo-advisery platforms, clients are asked to complete an online questionnaire that will determine an investor’s risk tolerance and personalized asset allocation.
“We are trying to take a high network investment solution, make it more accessible to a wider audience and on a global scale,” says Michael Kane, who is also CEO of Hedgeable. “There is this huge ground swell of millennial investors who are going online to invest, but they don’t have $50-million to get sophisticated money management. That is where we come in.”
The platform differs slightly from the average robo-offering.
First, unlike other robo-adviser platforms, Hedgeable offers access to products in addition to exchange-traded funds. Investors can also access individual stocks, private equity, master limited partnerships, bitcoin and real estate investment trusts.
Secondly, the portfolios actively manage risk. Instead of buy-and-hold techniques during market downturns, portfolio managers at Hedgeable are selling positions as market conditions change. If a market crisis occurs, such as in 2008-2009, 100 per cent of holdings could be placed in cash or fixed income to preserve capital, says Mr. Kane.
“We focus more on downside protection and risk management, and one of the ways we do that is by offering our clients more alternative asset classes that are less correlated to the market,” says Mr. Kane. “Investing in bitcoin, private equity, and other alternative products allows us to replace the cookie cutter automation with customized portfolios.”
Portfolios are invested in U.S markets and held directly in U.S. dollars. Canadian clients have the option to hold their portfolios in Canadian dollars if requested.