iQ Autotrading Pricing Versus a Hedge Fund
To have your account auto-traded by InvestiQuant side-by-side with ours and other clients, we charge a flat annual rate. The fee equates to a fraction (typically 15-25%) of the average historical returns of the program (not hypothetical, backtested nonsense - but broker-verified, live trading net results). Most investors tell us that they believe this targeted ratio of return-to-fees is not only fair, but compelling.
However, some investors get confused when they try to compare our annual subscription fee to that of a hedge fund's management fee. It's apples and oranges.
The amount you invest in a hedge fund directly determines the amount they trade for you and your annual fees. However, the amount you allocate to an InvestiQuant futures program has little to do with your annual fees. Since futures contracts are leveraged instruments, you must use the “notional” trading level of the program - not your investment amount - for an apples-to-apples comparison of fees. Click below to watch a short video explaining how the notional value of futures contracts is calculated.
For example, the InvestiQuant S&P 500 program trades an average of ~2 futures contracts per day. Based on the notional trading level of these contracts, our current annual subscription price equates to less than a 1% annual management fee (.91%) of the value of the markets being traded for you - which is less than half of a traditional 2% hedge fund management fee.
Even better, we don’t charge a profit-sharing fee like most funds. For example, if we charged a popular hedge fund pricing structure of 0% management & 30% profit share, it would cost clients nearly double our annual fee per year. Granted, there is a less upfront risk with such a structure, but we believe most clients come out well ahead with a flat fee over the long term.
Another Advantage
Another tremendous benefit of investing in an intraday-only, futures trading program is that our brokers allow no-interest margin funding (i.e. you can fund your account with a fraction of the trading level of the actual program and pay no interest). Click below to watch a short video explaining the difference in trading futures with margin versus securities.
Bottom line: the ability to fund and invest using the inherent leverage of futures and pay via a low, flat rate structure are significant advantages for investors.