Robo advisor Hedgeable will be removing its SEC
registration on Aug. 9 and discontinuing account management on the automated
investing platform, a little over 9 years after the company’s founding.
The firm listed 1,930 accounts, 1,698 clients and nearly $80 million in assets
on its most recent Form ADV. Forty of those clients were high-net-worth, with
assets under management totaling over $12 million. Among startup robos, only
two have grown beyond the $1 billion in AUM level in the U.S. market:
Betterment with $14.1 billion and Wealthfront with $11 billion.
Lately the co-founders, Michael and Matthew Kane, have
focused their attention on building a blockchain-based fintech platform in
another company they co-founded, Hydrogen Technology Corporation.
Hedgeable users will have access to their accounts until
Aug. 9, but after that date assets will be turned over to custodian Folio
Investments. From that point forward, users will be able to continue logging
into their account for “supportinquiries,” but will not be able to access any
account information, according to the company. Those same users will have the
option of keeping their funds at Folio in a self-directed account, with no
monthly management fees until the end of the year.
The company is discontinuing portfolio management with its
characteristic eccentricity and a hint of mystery; their quirk came
through in job
titles and their gamification approach toward investing. In an often
vanilla robo environment, the automated investment platform was known for
pushing the boundaries, taking an
active approach to investing and giving its users access to
cryptocurrencies, individual stocks, ETFs that tracked commodities and even
“Just because you have $20,000 doesn’t mean you can’t
invest like someone with $20 million,” Michael Kane said back
Performance didn’t always add up, however. Despite a
portfolio with a Sharpe ratio higher than its robo peers, by the end of the
first quarter of 2018 the firm’s taxable account achieved middling annual
to BackEnd Benchmarking’s Robo Report. Its IRA returns for the same period
were lower than many of its peers, a result of high allocation to fixed income
“If it was so great, they wouldn’t shut it down,” said Tim
Welsh, president and CEO of Nexus Strategy, of Hedgeable’s plan to
discontinue managing portfolios. “It’s the same pattern we predicted all along:
that the direct-to-consumer robo is a very challenging model.” He noted that
the business-to-business approach in fintech is more sustainable, because it’s
so difficult to demand a premium price online from consumers.
“This hasn’t been an easy decision, but we believe it’s the
right one,” said the Kane brothers in a note to Hedgeable’s investors. “To be
clear, Hedgeable, Inc. is not shutting down, selling, merging, filing for
bankruptcy, or insolvent. We are simply removing our SEC registration.”
Hedgeable has not released any immediate plans for the company.
The Kane brothers, however, have been leaving clues to
their next moves. They “will be spending the bulk of our time
on [Hydrogen] after the Hedgeable wind down,” said Matthew Kane,
Hydrogen’s CTO. Hydrogen CEO Michael Kane participated in a recent industry
event on blockchain and artificial intelligence, concepts with which they are increasingly
“We had to build a lot of things from scratch,” said
Michael Kane about Hedgeable. They’re hoping Hydrogen’s products, which Kane
compared to Amazon Web Services, will serve as the foundation for future
companies with a focus on “bringing fintech to the masses.”
“In the next 10 years, if you’re not building apps that
have some sort of decentralization, you’re probably not going to be in
business,” Michael Kane explained.
Currently in development, one of Hydrogen’s toolsets,
Hydro, interacts with the Ethereum blockchain as a sort of “fintech OS” that
future fintech applications can be built around. It will eventually consist of
five core components, with capabilities that will range from validation and
authentication to transaction protocols, matched to the company’s Atom
Hydrogen is continuing to sign up developers as they build
their product library, having received over 35,000 signups in over 50
countries, according to Michael Kane.
here for the original article from Wealth Management.