Amateur Advice Invited for New Fund
October 30, 2000
InteractiveFunds.com of Dallas, the one-year-old financial services technology company and iExchange.com of Pasadena, Calif., the online investor community, have announced they will merge. The new company will be based in Dallas and will be called iExchange.com. Terms of the merger were not disclosed.
The venture's first new products, to be introduced after the beginning of the year, will be three no-load mutual funds designed for online investors. Each of the funds will carry the iExchange name and will be managed by InteractiveFunds Investment Advisory Services, a newly-registered investment advisory firm in Dallas. The fund adviser expects to eventually allow its investor to make stock recommendations to the fund's investment managers.
This is the second online mutual fund group that will seek investment advice from ordinary investors. StockJungle.com of Los Angeles was the first to do so, in its StockJungle.com Community Intelligence Fund, which was introduced in November, 1999.
Since then, the StockJungle.com Community Intelligence Fund has attracted only $7 million. But taking the investment advice of some 17,000 StockJungle.com investors has produced strong returns. Year-to-date through Oct. 20, The StockJungle.com Community Intelligence Fund has returned 30.52 percent, according to Morningstar of Chicago. That has put the fund ahead of 98 percent of its peer group.
InteractiveFunds.com was founded in mid-1999. The firm believes in the power of individual investors, according to the firm's website. The firm had been focused on building its MutualMinds.com financial services unit which registered three mutual funds with the SEC in August.
iExchange.com was launched in March 1999 by an entrepreneur and a lawyer. It was also among the 35 companies backed by Idealab!, a venture capital firm in Pasadena, Calif.
iExchange began by selling equity research to individual investors. But it has changed course and chosen to build a community site.
Both professional and amateur investors may make equity recommendations at the iExchange site. Beginning this month, the firm began offering $25,000 rewards each month to those whose advice is most frequently consulted judging by the number of times individuals seek out the information online.
"Both companies were founded on the principle that all investment intelligence does not reside on Wall Street," said J. Randall Bullard in a statement announcing the merger. Bullard is one of the co-founders of InteractiveFunds.com and will become CEO of the new iExchange.com. The company will use both the proprietary asset management and modeling technologies of InteractiveFunds.com as well as the investment advice of its investors for its products, said Bullard in a statement.
The three funds to be launched next year, had originally been registered by InteractiveFunds.com under the MutualMinds.com name. But because of the merger of InteractiveFunds.com with iExchange.com, the funds will soon be re-registered as the iExchange Funds, said Bullard.
InteractiveFunds.com had hired an outside investment manager to advise the three funds. But that plan was abandoned, said Bullard. InteractiveFunds.com and iExchange decided, however, that the funds would be managed internally. They have hired some staff but is still searching for another portfolio manager, said Bullard.
The new funds will include the iExchange Diversified Growth Fund, the iExchange Small Cap Growth Fund and the iExchange New Economy Fund. The funds' investment adviser will use a proprietary software program to select stocks for each fund's portfolio, according to the funds' preliminary registration filing. The stock picking process, however, will begin with recommendations and stock price forecasts made by investors at the iExchange website.
Each online investor's recommendation will be analyzed to determine if it meets the fund's objectives and risk profile and in what proportion the stock should be considered for inclusion in the fund, according to the filing.