Credit: Shutterstock photoFor years, the only path for people who wanted to be money managers on Wall Street has been a long and tedious one. Many years of higher education and multiple degrees got you in the door, if you were lucky, and only after years of training would you maybe get a shot at managing real outside money.
But that’s changing thanks to companies like FundSeeder. Co-founded by a trio of Wall Street veterans—including industry legend Jack Schwager— the goal of FundSeeder is to, as the company says, empower the next generation of asset managers.
In their view, Wall Street is hampered by a lack of talented traders. And the barriers to entry are so high that just getting a foothold can be a herculean task without the proper credentials.
So FundSeeder is hoping to change that. Benzinga caught up with Schwager to find out exactly how.
Benzinga: Explain the concept of FundSeeder.
Schwager: The basic concept is to create a central website that would connect undiscovered trading talent with allocators looking for undiscovered trading talent. And a related idea was to do it in a way where you get the traders’ data, not directly from them but you link to their accounts through their brokers, so you’re getting their return data through their brokers directly on a daily basis. That was the basic concept that [CEO] Emanuel Balarie, pitched to me when he asked me to join as a partner, and my response was “That sounds like a really good idea. Nobody really has done that.”
Benzinga: So FundSeeder is essentially serving as a matchmaker between people who want to manage outside money, and allocators, firms looking for good money managers.
Schwager: That is a perfect one-line description of one component of what we’re doing. There are two components to our model. There is a technology part of our business, FundSeeder Technologies. That offers our tracking and data analytics package for free to traders. Then there is FundSeeder Investments which is a regulated company that deals with qualified and accredited investors. FundSeeder Investments allows us to allocate capital to managers who may be using the FundSeeder Technologies product.
After the investor platform is launched [sometime in 2018] then the active role of connecting traders and allocators will become one of the critical functions of the company.
Benzinga: So if FundSeeder Investments is different than the FundSeeder platform, who are you targeting with each one?
Schwager: Well on one hand our target audience is people who have trading skill and would like to manage money. These people would be candidates to use FundSeeder Technologies That’s one side of the scale. And on the other side of the scale we’ll be targeting allocators who are interested in not just investing in the same short list of hedge funds that everybody in the industry already knows about. These allocators would be interested in trying to find new trading talent willing to become properly structured to accommodate a professional asset management business. At some point we would like for investors to be able to search for and invest in their own traders or possibly to invest in a ready-made portfolio of traders via one of [FundSeeder Investments’] multi-manager products.
Benzinga: How does the FundSeeder trader platform actually work?
Schwager: So a trader registers for the site, fills out some fields, and then links their trading account to the broker.
For traders using a broker that is currently not linkable, we also have a template where they can upload their daily data. In that case those accounts are identified as unverified on the platform since the information is not coming from an independent third party. In that way, we always have the distinction between verified and unverified accounts.
Once a trader’s account is linked, the account data is uploaded automatically every day. This populates our analytics and statistics, generates a FundSeeder score, and then the trader can see a range of interesting things like their equity curve, underwater curve, annualized volatility, or they can even conduct technical analysis on their own equity curve.
Benzinga: How exactly does the matchmaking occur between allocators and the traders on the platform?
Schwager: On the investor platform, allocators will have a search page where they can indicate things like “I want to see managers with track records of more than three years with a Sharpe Ratio of more than one” and “I want managers who trade only futures.” Basically, investors will have multiple filters they can apply. Or they can just go on the site and see the traders in order of ranking.
Benzinga: What brokers are linkable through FundSeeder?
Schwager: There’s a full list available on the site. We’re in the process of expanding the broker list, that’s a big focus actually. Our biggest participating broker to date has been Interactive Brokers, but one of our founding concepts was to be broker agnostic. We want FundSeeder Technologies to be able to link with any broker in the world who’ll have us.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
