A look at startup firms challening mutual funds

AP News
Posted: Nov 25, 2009 3:59 PM

Covestor Investment Management and kaChing are online ventures that seek to challenge traditional mutual funds. Borrowing ideas from social networking, the startups help connect small investors with individuals the companies deem top money managers. The investors can choose a manager to follow, and make trades in a brokerage account based on the managers' market moves.

A look at the companies:

NAME: Covestor Investment Management

OPERATIONS: London and New York

FOUNDERS: Richard Tahta, Perry Blacher, Simon Veingard

VENTURE CAPITAL BACKING: $6.5 million raised since last year; funding from New York-based Union Square Ventures, Boston-based Spark Capital and London-based Amadeus Capital Partners.

BUSINESS MODEL: Investors put a minimum $10,000 into a brokerage account, and pick one or more model managers whose trades they can mirror. Fees range from 0.5 percent to 1.5 percent annually of the amount invested, depending on how much the manager agrees to. Covestor equally splits the revenue with professional managers.

WEB SITE: http://www.covestor.com


NAME: kaChing Group Inc.

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HEADQUARTERS: Palo Alto, Calif.

FOUNDERS: Dan Carroll and Andy Rachleff

VENTURE CAPITAL: $3 million in 'angel investor' funding. Backers include Marc Andreessen, Netscape co-founder; Jeff Jordan, former president of PayPal; and retired partners from Benchmark Capital and Kleiner, Perkins, Caufield & Byers.

BUSINESS MODEL: Investors can open an account with a minimum of $3,000, and pick managers whose trades they can copy. Fees average about 1.25 percent of assets annually. KaChing gets 25 percent of the revenue.

WEB SITE: http://www.kaching.com