Sliced Investing today launched a tool to connect accredited investors who previously couldn’t meet the required minimum investment, to hedge funds.
You won’t be able to use Sliced to drop $1,000 into a hedge fund, but its service should allow qualified investors to deploy low five-figure sums into hedge funds that previously had mid-range six-figure minimums.
Sliced intends to get around minimums by pooling users’ capital into larger tranches. Users will be able to select a fund on Sliced that focuses on a certain strategy — say, equities or real estate — that meets their own investment bent. Other users can do the same, and after what the company calls a “threshold” is met, the accumulated monies will be disbursed into several hedge funds that match the selected strategy.
For individual users, this means they get to pick a hedge fund varietal, and invest their modest capital into three or four hedge funds at once. They will, if you’ll allow it, hedge their hedging.
Sliced hopes to have $50 million under management by the end of its first year.
The company’s founders, Akhil Lodha and Mike Furlong, declined to tell TechCrunch if they are raising capital for their business further than what they received from Y Combinator as part of its current class. That said, I’d be surprised if they aren’t.
Sliced plans to take a minor cut on customer upside. It won’t take a slice at first, but later on will pick up up to 50 basis points — 0.5 percent — of profits. So if its users see their invested funds grow, Sliced will absorb a minute piece of that profit. The company is also contemplating white-labeling its platform, something that could bring in more consistent revenue.
According to Sliced’s founders, there is around $2.6 trillion invested in hedge funds today. That implies huge demand. It will be interesting to see how quickly Sliced can grow, and if its strategy to bring hedge fund investment access to smaller investors will see similar appetite. The company is a bet that investors who pass the test of accreditation — with an income or liquid asset requirement — but fall below the traditional hedge fund net-worth threshold do in fact want access to hedge funds now and in large amount.
Sliced’s attempt to make previously rarefied investment vehicles available to a larger, more normal group of people fits next to AngelList’s work to make angel investing easier to access. I’ll check back with the company in a few months to see what sort of traction they have managed to pick up.