Wiki-Funds Management

The global phenomenon of Wikipedia has spread to funds management with a California-based investment group harnessing the talents of traders and investors to boost its fund performance.

Marketocracy, as the group is known, has removed the notion of ‘key-man risk’ often associated with funds management groups – whereby leading investment specialists or analysts uproot and go elsewhere leaving funds in crisis.

Instead Marketocarcay runs several ‘real money’ funds and farms using the skills and talents of thousands of traders and investors – using their collective skills to help manage its range of funds.

Marketocracy Capital Management, is the investment adviser for the Marketocracy family of mutual funds and uses the research generated by Marketocracy Data Services.

Marketocracy’s website has an open invitation for traders and investors to compete with each other using $1,000,000 in cyber dollars.

To date Marketocracy has recruited over 55,000 people to manage over 65,000 model portfolios. Its staff track, analyse, and evaluate the virtual trading activity and rank the stock picking ability of traders to identify the best investors over the long and short term.

Marketocracy Data Services is the research arm of the group and has a mission to find the best investors in the world.

Those who outperform the averages are then set the goal of moving into the top 100 – the M100 – where they are offered special privelages and compensation based on funds under management.

So does it work? As they say, past performance is no guarantee of future performance – but so far it seems to be working.

The MOFOX since inception in 2001 has returned 86% versus the S&P500’s 46% and with a lower Beta. The top 10 cyber portfolios have returned between 375% and 590% over the last five years.

Marketocracy analyzes and ranks the stock picking ability of its members using a complex algorithm that incorporates long and short-term performance, as well as an attribution analysis that accounts for market, sector, style, and trading contribution.

This, the group argues, removes those who outperform by “being in the right place at the right time”.

So can we expect other fund managers to do away with their expensive and demanding investment portfolio teams?