Social investing site Covestor wants to shake up fund management

Ever had the urge to share the performance of your stock portfolio? You know, for bragging rights, or in an attempt to convince Goldman Sachs to hire you?

No? Well there’s a whole bunch of people out there on the interweb who have – and quite a lot of them congregate at Covestor, which describes itself as “a portfolio sharing service for proven self-investors and for those wishing to track them.”

Or, as Erick Schonfeld at TechCrunch put it,

Now anyone can join, and it is welcoming voyeurs who only want to watch other’s performance but not share their own. This should broaden the appeal of the site and provide a no-commitment entry point for people who may be uncomfortable with sharing their personal financial data on the Web (i.e., most of the population).

Covestor, which launched last June, allows users to link their online portfolio to a brokerage account, so there’s real money on the line, as well as reputations.

But the site has ambitions beyond fostering stock voyeurism and bolstering would-be professional traders’ CVs: founder Perry Blacher is out to “deinstitutionalise fund management.”

For Blacher, Covestor is in the business of fund management:

“Our members are invested in over 6,000 securities around the world. One in five of our users has outperformed the S&P 500,” Blacher told FT Alphaville. “Why shouldn’t people be able to invest alongside our users through a web 2.0 business model rather than in a traditional, managed fund?”

Eventually, Covestor intends allow members to monetise their publicly displayed trades – by becoming de facto fund managers. According to an explanation on the site,

Covestor will shortly enable individuals to invest money directly alongside your portfolio, rather than in underperforming Mutual Funds. The fees charged for this service will be shared with you.

And:

If you elect to be paid, others will only be able to track you if they invest in a managed account that will make investments informed by your data feed. Covestor will open standard managed brokerage accounts in the name of each follower that chooses to continue to track you, called “Managed Tracking Accounts”.

Covestor’s ambitions appear to be global, since each of these accounts “will be managed by a regulated investment manager within the appropriate jurisdiction of the follower, who will automatically execute trades on their behalf.”

But users will not be required to cash in on their superior stock picking abilities, if they’re not so inclined; they’ll be able to continue freely sharing their trades.

“Right now, we’re focusing on the retail investor, but we may look to move into the institutional market,” says Blacher. “We’re going to be competing with the Fidelitys of the world.”