The exclusive club of family offices just got a comma shorter.
For the paltry $350,000, or just over five times the median U.S. household income, Equi allows individuals to invest in complex strategies focused on alternative assets, which the company says is common among billionaires looking to increase their wealth.
These billionaires and high net worth individuals often work with family offices that manage their investments. Thanks to Equi, millionaires can now also invest in these strategies. In addition, they can do so without having to invest $70 million in seed capital, which the company says would normally be required to access such strategies.
Alternative assets are attractive to some investors because they have historically provided higher returns than stocks or bonds. Equi offers several in its flagship investment fund, including hedge funds, private equity, private real estate and venture capital.
The flagship fund Equi was launched just over a year ago and has a target annual return of 17-23%. In comparison, the S&P 500 has an annual average return of 10.5% over its lifetime, although it remains to be seen whether Equi can continuously deliver these high returns over a long time horizon.
To invest with Equi, one must qualify as an accredited investor, usually by meeting an annual income threshold of $200,000 for individuals or $300,000 for married couples. About 1 in 10 American households meet this definition.
While it serves this very small fraction of investors today, Equi hopes eventually to scale up its product offerings to include registered public funds that can attract tens of thousands of investors at significantly lower minimums, whether or not they are accredited. business.
Equi co-founder and CEO Tory Reiss worked as a financial literacy teacher for many years while working in a variety of technical positions, he told MovieUpdates in an interview. Through these efforts, he had vulnerable conversations about money with a wide variety of people, realizing that most of them invested in traditional portfolios of stocks and bonds through mutual funds, if at all.
“The traditional investment advice of just average the dollar cost in Vanguard funds, and hope everything turns out alright — that was true, and that was good advice for, say, the last 40 years that we’ve been in this declining interest rate environment,” Reiss said. .
“But when I got to a point where I really had enough money to invest and could afford to look at different asset classes, I really started studying real estate and private credit,” he continued.
Inspired by the iconic book Pioneering Portfolio Management, the iconic book by ex-Yale endowment chief David Swensen, Reiss began investing in some of these alternatives with the aim of maximizing portfolio diversification. Once he started experimenting with these strategies, Reiss no longer felt comfortable advocating for others on behalf of traditionally prescribed investment advice when he wasn’t following it himself, he said.
Reiss’ entrepreneurial journey in fintech began when he co-founded the consumer debt refinancing tool Harvest Money in 2017. The company raised seed capital from investors, but shut down shortly after due to issues between Reiss and its co-founder, he said.
Reiss’ next venture, TrustToken, was much more successful. The stablecoin company, co-founded by Reiss in 2018, raised $30 million in funding from investors last August, including Andreessen Horowitz, and continues to scale its platform today. Still, Reiss said, he couldn’t get the idea for Equi out of his head, so he began researching it as a research project before taking the plunge to focus on it full-time in early 2020.
According to the company, Equi’s minimum investment of $350,000 has fallen from $1 million when it first launched.
There are plenty of startups that offer institutional investment strategies to a wider group of investors, including Titan, Allocate, and YieldStreet, just to name a few. Most of these companies focus on a specific subset of products — Titan aims to mimic hedge fund investments in public stocks, while Allocate focuses on venture capital, and YieldStreet is best known for its private debt products, Reiss explains.
Equi offers a much broader range of asset classes in one place and plans to eventually partner with other platforms, including Allocate, to offer their funds on Equi, Reiss said. Rather than expect users to sign up for multiple different investment platforms for each asset class, Reiss hopes Equi will serve as a sort of one-stop-shop for private deals.
Equi can access private fund allocations because it is “systematic targeting”[s] relatively undiscovered strategies” rather than focusing on large branded fund managers, he added. Often, these managers execute niche strategies, such as investing in life insurance plans or trading carbon credits, the company said.
Itay Vinik, Chief Investment Officer of Equi, launched the hedge fund United Global Advisors and ran it for nearly seven years before co-founding Equi with Reiss. Vinik’s experience in the hedge fund world has informed Equi’s data-driven approach to investment management and risk assessment; the portfolio team uses Equi’s internal technology to identify and structure deals with fund managers, Reiss said. That’s a relatively unconventional approach, at least in the private markets, where deals are often obtained through pre-existing personal relationships.
Unlike stocks offered on popular trading platforms such as Robinhood and Public, Equi’s shares are intentionally designed to be held forever, he added. Investors in the flagship product typically allocate between 5% and 50% of their investable assets to it, and the founders of Equi themselves put 80% of their own liquid assets into strategies on the platform, Capital Reiss says he plans to to hold and watch put together for decades.
Since the official beta three months ago, with 300 participants, Equi says it has admitted about 7% of customers on the waiting list. Individuals on the waiting list, including Fortune 500 executives and multi-billionaires, represent more than $800 million in capital — an amount that Reiss says reflects users’ significant interest in the Equi platform. Reiss declined to share the number of users Equi has today, but said the company is “moving toward scale” and is working to eventually launch its product publicly.
The company announced it has raised $10 million in seed funding from a range of investors including Montage Ventures, Foundation Capital, Hustle Fund and Loom founder Shahed Khan. All investors, including those investing on behalf of an institution, have made a commitment to put some of their personal assets into Equi, the company says.
The startup has sparked interest purely through informal marketing and word of mouth, Reiss said. Users (and members of the waiting list) have typically heard about Equi via Twitter and live investing Q&As hosted by Vinik on YouTube, he added.
Reiss is optimistic about the size of the market Equi is targeting, noting that only accredited investors have an estimated $73 trillion in investable assets.
“I’ve seen high net worth investors, endowments and multifamily offices shift over the past 20 years to having nearly half of their portfolios in alternatives, but if you look at the kind of mainstream consumer, they’re still low single digits,” Reis said. .