Titan Invest is a robo-advisor that offers investment services similar to those of a professionally managed hedge fund.
It was founded in 2018 by Joe Percoco, Clayton Gardner, and Max Bernardy and passed $150 million in assets under management in Q3 of 2020.
Joe and Clayton have several years experience in hedge fund investing between the two of them – working for companies such as Goldman Sachs, Cerberus Capital and McKinsey and Co.
Their technical co-founder, Max Bernardy, is a graduate of Stanford University with a degree in computer science. He has also been the technical lead for several early-stage technology companies prior to joining Titan Invest.
Titan Invest, as a platform, uses cutting edge technology combined with an innovative business model to provide users with access to world-class investment opportunities while letting their algorithms do all the heavy lifting. Investors can invest capital and track the growth of their portfolio through the highly-rated Titan app for Apple and Android.
Hedge funds are normally inaccessible to the average Joe and generally require one to be an accredited investor to participate. What Titan Invest aims to do is bring this investing technique to a demographic that hasn’t been privy to the opportunity in the past.
Titan Invest requires a minimum opening balance of just $500 (with a $100 transfer fee minimum) and calls itself an asset manager for millennials. Is this investment manager right for you? Continue reading our full review below.
What is Titan Invest and How Does it Work?
As with many conventional robo-advisors, Titan Invest constructs and manages your investment portfolio.
Where they differentiate themselves (other than the personalized hedge) is that they actually invest in individual stocks rather than traditional ETFs, which are a basket of different securities.
The individual stocks in which Titan places your money are limited to what Titan believes are the 20 highest quality companies on the market. These companies include household names and members of the S&P 500 such as Microsoft, Alphabet (Google), Apple and more.
After the individual stocks are selected, your portfolio is then provided an automated “personalized hedge.” The size of the hedge will be dependent on your personal risk tolerance which is assessed upon opening the account.
The range will be: conservative, moderate, aggressive. The more conservative you are as an investor (ie the less risk you can tolerate) the larger the hedge against your individual stock investment. This allows protection against severe price swings and overall market volatility. That said, it will not guarantee the protection of your principal investment and your overall portfolio could still lose money.
To get a better idea of how your funds are allocated based on your appetite for risk. Here is the general rule of thumb according to Titan (assuming your portfolio is not in a downturn):
- Conservative Investor: Titan will allocate roughly 10% of your position to the short.
- Moderate Investor: Titan will allocate roughly 5% of your position to the short.
- Aggressive Investor: Titan will allocate closer to 0% of your position to the short.
If your portfolio is experiencing a downturn, the breakdown would look more like this:
- Conservative Investor: Titan will allocate roughly 20% of your position to the short.
- Moderate Investor: Titan will allocate roughly 10% of your position to the short.
- Aggressive Investor: Titan will allocate closer to 5% of your position to the short.
Remember, the Personalized Hedge feature is fully-automated. There is no financial advisor behind the wheel. The way your Personalized Hedge self adjusts will be dependent on your portfolio’s performance relative to the S&P 500. If the performance of your portfolio starts declining against the S&P 500 for a period of time, more of your funds will be allocated to the hedge (and vise versa).
What is a Hedge Fund and How is Titan Invest Different
In a nutshell, hedge funds are pools of money contributed by investors with a fund manager whose mandate is to maximize returns for investors while mitigating risk through “hedging.”
You may not realize it, but you probably make financial “hedges” already in your life. Do you own a home? Did you purchase homeowners insurance on that home to protect against fires and break-ins? If so, then you’re essentially purchasing a hedge.
While hedging with stocks gets a little more complicated than simply purchasing insurance on the stock, the basic principle applies. You invest in an asset (the stock) and then purchase another financial instrument that pays out in the event of said asset losing value.
Hedge funds can invest in pretty much anything – stocks, real estate, land, currencies, etc. and are highly responsive to the market.
Titan Invest is not a hedge fund but provides clients a personalized hedge tool to protect capital in times of market downturns and high volatility. This tool aims to replicate the strategies used by hedge funds to outperform market returns in the long run.
Like hedge funds, Titan Invest accounts are highly responsive to the market. Titan re-adjusts its Flagship stock portfolio each quarter and intervenes when your stocks or overall portfolio enter a downturn.
Another key difference between Titan accounts and hedge fund accounts is liquidity. Whereas hedge funds lock up your funds to allow managers to back out of investments, Titan does not. When you invest with Titan, you can withdraw your funds whenever you want.
Finally, Titan costs its investors much less than the average hedge fund. Many hedge funds charge a very high performance fee, but as you will read about in the next section, this is not the case with Titan Invest.
Titan Invest Fees and Features
Titan charges an annual advisory fee of 1.00% and this encompasses all services. There are no performance fees of any kind unlike hedge funds that have historically charged up to 20% of the investor’s net profit for a calendar year. On top of that, Hedge funds generally charge a 2% asset management fee for their services as well.
This 2% asset management fee plus 20% performance fee has been dubbed two and twenty by those in the financial industry and it has come under fire by investors and politicians alike for a number of reasons.
Titan Invest Fees and Facts
|Annual Fee||1.0% of AUM over $500|
|Investor Qualifications||US only|
|Custody & Clearing||Apex Clearing|
|Legal Counsel||Lowenstein Sandler LP|
|SIPC Insurance||Up to $500k|
If you’re thinking 1.0% of AUM annually is a little steep, that is because it is. Generally speaking, robo-advisors charge anywhere from 0.25% – 0.50% in annual fees.
Features and Perks
That said, there’s a nice remedy to lowering your annual fee if you can bring a few new customers into the Titan Invest family. Currently, when you refer people to Titan, they will knock 0.25% off your AUM for every person you successfully refer, with the potential of bringing fees to 0% if you can get four people. The best part is that the fee waiver is applied to your account for as long as you have it. You don’t have to refer new people every year.
Other than kickbacks for referring new clients, the Titan Invest platform also offers many additional features to its investors. These include:
- personal digital vaults or separately managed accounts of your own,
- fractional share trading,
- access to a portfolio manager, and
- the ability to make instant deposits.
Titan Invest Account Types and Services
Titan offers two investment programs:
- Titan Flagship Program (launched in 2018), and
- Titan Opportunities (slated to launch in July 2020)
The primary difference between the Titan Flagship and Titan Opportunities (once it launches) is the size of the 20 companies in which Titan spreads your funds between. With Titan Flagship, the 20 companies are going to be made up of large household names. With Titan opportunities, the focus will be on smaller companies that are poised for exceptional growth.
Titan Flagship Program Details:
|Number of Stocks||20|
|Median Market Cap||$180 billion|
Titan Opportunities Details:
|Number of Stocks||20|
|Median Market Cap||$5 billion|
Regardless of whether you choose Titan Flagship or Titan Opportunities, you’ll have the option to house these in a retirement account or individual investment account.
Titan invest offers both individual investment accounts and retirement accounts such as traditional IRAs, Roth IRAs and 401ks.
In the early Fall of 2019, Titan Invest began offering Individual Retirement Accounts (IRAs) as part of their suite of retirement products.
This means clients can now take advantage of everything Titan Invest has to offer in the way of low cost hedge-style investing BUT with the added benefits and tax advantages of an IRA. You can also roll over your 401(k) or 403(b) retirement accounts. They have a concierge system in place designated to roll those into your Titan account.
Titan Invest Historical Returns and Performance Review
Because Titan was founded in just 2018, there is limited data to draw upon, but the outlook thus far seems promising.
Per the June 2020 Performance Update, Titan clients were up +8 to +10%. Conversely, the S&P 500 was down -3% and Wealthfront and Betterment (other popular robo-advisors) were down -6% and -10%, respectively.
In the second quarter of 2020, Titan brought a +31% return and the S&P brought +21%. Titan attributes these high returns to three key drivers: idiosyncratic alpha, big tech rebound, and flight to quality. Full hedges remain activated.
Since its founding in 2018, Titan Invest is up +37% total. The S&P 500 has gone up +19.6% since then, Wealthfront +7.6%, and Betterment just +0.5%.
These numbers speak for themself. Titan Invest, through outstanding research and planning, has proven itself to be a force to be reckoned with. In just over two years, its investors have seen higher returns than they otherwise likely would through another robo-advisor or hedge fund.
Keep in mind that this data is for Titan’s Flagship strategy. Titan Invest is in the process of developing a second strategy, Titan Opportunities, that will focus on identifying smaller U.S.-based companies that are expected to see high growth rather than investing in companies that are already at the top.
Is Titan Invest Safe?
Any reasonable person is going to wonder whether their money is actually going to be safe in an investment account operated by an algorithm.
The answer here is basically yes, or at least as safe as any robo-advisor or digital investment platform can be.
Titan Invest is not any more unsafe than other investment accounts, brick-and-mortar or otherwise. It uses high tech security encryption and is insured by the Securities Investor Protection Corporation.
SIPC covers accounts up to $500,000 and all data flow is encrypted using 256-bit encryption and SSL.
Millennial or not, Titan Invest presents many advantages.
You don’t need to be fabulously wealthy to begin and you don’t need to do much of anything to maintain your account.
You’re given tools that have historically only been available to financially privileged clients and the returns thus far have been eye-catching.
On the flip side, the 1.0% annual fee is certainly above average for robo-advisors and the historical returns, while substantial, only go back two years.
That said, Titan Invest does do a good job of providing clients with a way of recouping some (or all) of the annual fee by referring new clients at 0.25% each.