By Moriah Costa on Wednesday 19 July 2017
The firm uses automated technology to keep track of risks, and emphasize downside protection.
The firm uses automated technology to keep track of risks, and emphasise downside protection.
While there is always a risk to investing, Scalable Capital uses technology and historic data to target risk.
The firm uses automatic algorithms to manage the risk of portfolios on a daily basis. The business was started by two former Goldman Sachs employees, Adam French and Florian Prucker, as a way to provide a solution to friends and family who kept asking for financial advice. The company is based in Munich but has offices in London and passports its services into Austria via its German operation.
French describes the business as one of the most “robo, robos.” The platform differs from other robo advisers by allowing clients to choose a level of risk, calculated as a percentage the portfolio would fall in a ‘bad year’ i.e 2008.
Scalable keeps portfolios within that risk percentage by monitoring algorithms and making any necessary investment changes daily. It focuses on downside risk protection, believing that the best way to make money is to not lose any in the first place.
As colleagues at Goldman Sachs, French and Prucker would spend hours bouncing ideas off each other about how to develop investing platforms with computer models. These early discussions were what formed the basis of Scalable Capital.
“We had witnessed the power of technology to improve investing in financial institutions and wanted to take it beyond them, to the likes of my friends and family,” French wrote.
The two later brought on Ella Rabener and Simon Miller to help expand into the UK. Rabener is the founder of Westwing, an online home and living brand in Russia and spent some time at McKinsey & Company while Miller is a former Barclays Capital trader.
Scalable has continued to expand since it first began in 2014 in Germany and in 2016 in the UK. The firm has raised over €41m (£36m) in funding and has over £200m in assets under management, with the firm adding more than £5m per week.
Scalable’s average client is 45-years-old and has assets of around £400,000. The minimum investment pool is £10,000. Many customers double their investments after five months, with an average portfolio size of £35,000. About 20 per cent of its assets are from portfolios of £418,000, with more than 50 per cent exceeding £84,000.
Like most robo-advisers, it has a simple fee structure, charging only 0.75 per cent a year plus around 0.25 per cent for the fund fee. The platform invests in global exchange traded funds, with the majority of investments in Europe and the U.S. It has five core building blocks to determine how it invests.
Investments are always globally diversified and in the most cost-efficient opportunities based on the investor profile, including goals, financial status and risk tolerance. The company then monitors and dynamically adjusts the profiles and regularly reviews and updates it as necessary.
With about 3,000 customers in the UK, the firm’s portfolios outperformed its peers in its first year of operation. In Germany, it partnered with manufacturing giant Siemens Private Finance arm to create an online wealth management solution for its 100,000 current and former employees. Investment giant BlackRock has also taken an interest in the platform and took a minority stake in the company in June.
The investment was part of the company’s efforts to expand its digital offerings, the firm said in its second quarter 2017 earnings release.
This post is part of a series of articles on some of the top robo-advisers in the UK and Europe and first appeared at RoboAdviceNews.com.