
Titan launches its mobile ‘not a hedge fund’ - akrymski
https://techcrunch.com/2018/08/20/titan-invest/
======
theycallhimtom
Both the article and
[https://www.titanvest.com/performance/](https://www.titanvest.com/performance/)
cite performance relative to S&P 500. If you expand out disclosures it says
"Figures cited for 2017 and since 2004 represent backtested performance of a
hypothetical account using Titan’s investment process, not an actual amount."
It's trivial to overfit a backtest to get whatever results you want. For a
startup whose objective is to "enable you to become a better investor" they
might want to start by explaining why you shouldn't take their performance
page seriously.

~~~
AznHisoka
yep and it makes this statement rather suspicious:“Of the ~3500+ hedge funds
out there, we track ~5% of them. We believe these are the good guys: long-term
oriented and rigorous in their research.”

Its the 5% that performed well in their backtest, but that doesnt mean they
will perform the best going forward.

What Titan did in 2016 was chose the top 5% of funds that did well up until
that point. Then when they saw it performed bad in 2017, they most likely went
back and chose a different 5% that did better. And recalculated all the
returns.

The problem is you cant keep doing this once you actually start investing with
real money.

~~~
norswap
Do you have any evidence for any of this, or did you just pick the most
uncharitable possible scenario and present it as factual?

~~~
AznHisoka
This is just all theory, of course but this is something most backtesters do,
so I wouldnt rule it out.

It helps to be overly skeptical when anyone claims to beat the index. Because
it is such a powerful claim.

~~~
neonate
You said "What Titan did". That's a far cry from "I wouldn't rule it out".

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turingcompeteme
I hope they aren't just using 13Fs to determine hedgefund holdings. I saw one
being filed recently and I was amazed at how useless they are for determining
a funds actual positions.

You don't need to report short positions. This resulted in many scenarios
where we were short a company, but from our filings, it looked like we were
long. 3 examples:

\- Class A and B shares. If you are long one and short the other, only the
long shows up.

\- Own the stock, but sold calls? Don't need to report the calls. Plus,
options that are reported are done so as if they are fully exercisable.

\- Debt, Convertible debt, and types of warrants and other instruments are not
reported.

So don't use them to determine a fund's thinking.

~~~
exHFguy1
Agree 100% with this. 13Fs are not indicative of most HFs actual bets.
Especially if they are running strategies where a bet consists of a bundle of
securities (Eg convert arbitrage).

Also, Given delay in reporting, you’d just be getting in after they get in and
likely they get out before you do. So the aggregate impact costs from this
strategy becomes their alpha. Hence why some of these LS guys always talk up
their positions.

~~~
AznHisoka
Agree with the second. Making money in stocks is not just what to invest in,
but when.

If you bought FB in the beginning of July just after a hedge fund reported it
(but they actually bought in April and sold in July) that would have been bad
for you.

------
MrMember
The average person is much better off putting their money in a whole market
index fund that charges a tenth of a percent (or less) rather than a managed
fund that charges 1%. The managed fund is unlikely to outperform the index
fund in the long term.

~~~
aml183
I disagree. It's very unclear what strategy will work over the next 20 years.
Many people are bullish on index funds because research has shown that they
outperformed managed funds over the past 10-20 years. It doesn't mean they'll
outperform over the next 20 years. Past results are no indication of future
results.

~~~
nostromo
> Many people are bullish on index funds because research has shown that they
> outperformed managed funds over the past 10-20 years.

According to John Bogle, this has been true for over 100 years. His analysis
goes back to 1900.

~~~
aml183
You can't backtest a fund such as VTI. The issue is that these analysis don't
take into factors such as volume. I'm sure if someone backtested $100MM
investment in Bitcoin starting from 2010, the results would be spectacular,
but we all know that buying pressure would've caused Bitcoin to skyrocket and
the returns would be less than the backtested results.

I personally tell people to invest in index funds if they don't understand
investing, but it doesn't mean it will do better than other options. Index
funds are only a recent phenomenon.

The biggest issue with index funds at the moment is "group-think". If everyone
in America is investing via index funds then when people need money, those
same index funds will fall sharply. There is a valid line of thinking where
one should avoid stocks with heavy exposure to index funds because those
stocks will have the best returns during an equities downturn.

[http://theirrelevantinvestor.com/2017/08/31/today-in-
market-...](http://theirrelevantinvestor.com/2017/08/31/today-in-market-
history-the-first-index-fund/)

~~~
chkdsk
You _absolutely_ can backtest VTI. We have reliable historical market data of
the total US stock market (what VTI is) going back to the late-1800s.

Also, please tell me 1 of those better options?

The link you posted seems to take the opposite view from what you expressed.
Batnick is very pro index funds.

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gringoDan
I don't see a clear value proposition here.

As others have mentioned, ~95% of people should only invest in index funds.
They are wasting their money if they actively manage it or put it into a
managed fund.

The value add of a hedge fund is its sophisticated research. Hedge funds have
analysts who are looking at satellite images showing the number of cars in
parking lots to determine whether sales at Best Buy are up this year, PhDs
creating ML models that incorporate behavioral finance, that sort of thing.

It seems like Titan operates in a space directly between these two business
models - higher fees without the sophisticated research. Its return over the
past year is promising, but you can't really evaluate the performance over
such a short time frame. I'm very skeptical, but hoping to be proved wrong.

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Havoc
>What Robinhood did to democratize buying individual stocks, Titan wants to do
for investing in a managed portfolio.

huh? RH's success comes from letting people play wall street hot shot trader
for free. "OMG did you hear what Musk just said?".

If they think they're capturing the same kind of audience attention with a
managed portfolio then they legit don't know which way is up.

>Titan picks the top 20 stocks based on data mined from the most prestigious
hedge funds

That's index ETF thinking. The real hedge funds invest in opportunities that
aren't even listed. You don't make hedge fund type return without hardcore
research & hardcore risk taking on the basis of that research.

The whole "hedge fund" thing might make for decent initial PR but I predict
this will backfire when people don't get the immediate visceral return they
expected. Acorn's "Invest & grow" type PR slogans are better if you are going
for managed because it'll align with the return.

~~~
kgwgk
reddit.com/r/wallstreetbets gives a good idea of where Robinhood's success is
coming from.

~~~
chkdsk
If you ever find yourself questioning the validity of all the studies
indicating how terrible retail investors are at investing...read
r/wallstreetbets and realize you and your index funds are still in the
minority.

~~~
Havoc
>and realize you and your index funds are still in the minority.

Quite the opposite. Index fund are busy eating the world alive.

If you've got massive money flowing into the top 100 in the index thanks to
ETFs the smart money is on companies 101 - 120. Similar risk profiles to the
top 100 but their price earnings profile hasn't been distorted yet but the
wave of incoming index wave.

Passive is indeed the truth but don't swallow it wholesale...you're just
buying into a top 100 self-reinforcing bubble that has no economic backing
without realising it.

~~~
chkdsk
As of October last year Index Fund investors still represented less than 18%
of the global stock market:

[https://www.reuters.com/article/us-funds-blackrock-
passive/l...](https://www.reuters.com/article/us-funds-blackrock-passive/less-
than-18-percent-of-global-stocks-owned-by-index-investors-blackrock-
idUSKCN1C82TE)

I'd hardly call that "eating the world alive." The only thing its eating so
far is the absurd wealth management fees old school financial advisors used to
make.

Also there's about 200 different indexes all slicing up the marketplace in
various ways. Not every investor is buying the large cap, cap-weighted index
(although most are).

Ultimately, this idea of passive "distorting" the markets just isn't true
(also I'm not sure what you mean by "earnings profile"...earnings are set by
consumer demand for a company's product, not investor demand for company
stock). Active traders set prices, indexes simply follow the prices set by
active traders. We are no where near the point where distortions would happen,
and if we ever got to that point, there would be massive incentive to profit
off of a easily predictable mispricing.

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Hasz
1% of capital every year is crazy money.

If the fund is really that good, they'll take x% of the profits and not charge
a fee on capital. You take capital because you're not really that good, and
you don't know (like basically everyone else) what's going to happen.

Funds know they can't reliably beat the market, and thus don't offer such
structures.

I want a ratcheting fee structure. No capital fees, and no fee if the fund
loses compared to its benchmark. The fund only makes money if it beats the
benchmark.

~~~
kgwgk
If the fund is really good, they take 2% of the capital and 20% of the
profits... (Actually if the fund is really good it's closed to outside
investors, so it doesn't really matter.) But of course if a fund is really
good it's not just a portfolio of 20 hedge-fund darlings rebalanced quarterly.

I don't know how do they select the 20 names from hedge fund filings (looking
only at their long positions, as they don't disclose short positions), but it
seems that diversification is not one of the criteria. Virtually all of them
are tech (IT/Telecom).

The 0-20% short (using inverse ETFs! [1]) is inactive, so no hedge at all
currently on this overexposed portfolio. If (when) there is a large correction
it may not be enough to ensure the loses are lower than for the market even
assuming that they do it in time (surely it worked well in the backtests).

But hey, it's just 1% and runs (only) on your iPhone!

[1] They track the inverse performance well each day but can diverge over
longer periods and have other risks that make them not-so-good as hedges. But
anyway is just 20% of the long exposure...

~~~
wishart_washy
^This. It feels like some cheap ML recreating a fund-of-funds with some shorts
that limit exposure.

------
Ntrails
> while using an app to cut out the costs of pricey brokers and Wall Street
> offices.

Unless they have DMA themselves, alongside their own order/execution platform,
I would suspect that a broker still exists who may well be in a wall street
office? And god damn if you think 1% is "cheap" for this (not-very) smart beta
strategy you need your head examined

 _Please don 't stock pick based on what some app tells you some other people
in finance have probably stock picked_.

If you believe in active management. Pay an active manager. If you believe in
passive investing, buy an index. If you believe in smart beta, pay a little
bit more for a properly defined strategy which fits your world view. This is
none of those things.

[Past Performance Is No Guarentee Of Future Success]

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paultudorjones
They are just a "Separately Managed Accout" as service.

[https://en.wikipedia.org/wiki/Separately_managed_account](https://en.wikipedia.org/wiki/Separately_managed_account)

------
syntaxing
Seems like a classic risk vs return scenario. If the return is that much
higher than the S&P 500, then the risk associated with it will also be higher.
I think the risk vs return is better balanced when you put your money in an
ETF in Vanguard especially since there low fees and "choices" for particular
markets.

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Bedon292
This looks very interesting. Has anyone here used it yet? And does hedging
really work with such low numbers? I thought the point of hedging was being
able to spread the risk across lots of large investments. Can you really
spread enough with only $1000?

~~~
freeone3000
Investors invest into the fund, the entirety of which is then available for
the hedge, and the total profits/losses redistributed back to individual
investors based on their share of the fund's total pool.

~~~
Bedon292
It specifically says they invest in your name and pick shorts based on your
risk profile though, which is where I got confused. It is not pooling
everyone's money together. So not sure how it actually can hedge with such a
small amount of money.

~~~
freeone3000
Based on the article, they use holdings of the same 20 stocks, and seem to
adjust risk exposure by varying the percentage of short-sell. Their Program
Brochure[1] backs this up - you get fractional stock as part of an investment
pool in the 20 stocks they choose, instead of entire shares, so you get the
same relative hedge you would otherwise. They do mention direct ownership, but
it's fractional shares still held through Apex.

[1]
[https://cdn.titanvest.com/library/Titan_Investor_Materials.p...](https://cdn.titanvest.com/library/Titan_Investor_Materials.pdf)

~~~
Bedon292
On their FAQ: "Is Titan a hedge fund?: No. You are not investing in a hedge
fund. Hedge funds pool their investors’ dollars together and each investor is
treated the same. We keep your money in your own individual account and
personalize this based on your risk tolerance and investment goals. Titan
invests you like an active manager, with the personalization of an advisor in
your pocket."

I could definitely not be understanding what they are saying, but it does say
they are not pooling.

[https://www.titanvest.com/faq/](https://www.titanvest.com/faq/)

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htrp
It's basically a mutual fund?

