Wikifolio.com, an Austrian financial services firm with an online platform for alternative investing in Austria and Germany, went live in Germany in 2012 with the aim of creating a community of investors and traders that can share trading ideas online.
The company offers a social trading investment platform where investors can create their own securities portfolios made up of tradable index certificates. Every trader on Wikifolio.com manages one or more hypothetical portfolios, representing their trading ideas and market views which can be turned into fully-fledged financial products, called “wikifolios” which are then listed on the Börse Stuttgart stock exchange.
Wikifolio.com allows investors to put their cash into the strategies of professional traders via ordering wikifolios through various online brokerages — similar to existing investment products. Each trade, including execution price and fees, can then be tracked in real time on Wikifolio.com and partner sites.
“Investors can track these Wikifolios actively, including all trading steps, in real time and invest in the most successful trading strategies,” says Andreas Kern (pictured), chief executive and founder of Wikifolio.com. “The main target group are self-directed investors who seek an attractive portfolio addition or diversification opportunities, because of our huge variety of different trading strategies.”
The company is also targeting younger investors who want to “dive deeper” into the capital markets, according to Kern. “This is possible due to the transparent strategies and track records – prices, trades and comments of our traders are updated in real time,” says Kern, adding that the goal is to establish Wikifolios as the preferred alternative for European private investors.
Transparency
The transparency of the platform enables users to see all trades without delay, while the performance-oriented fee model also helps, according to Kern. He says that the company’s product architecture, which offers the design and management of “very dynamic” trading strategies at a low cost, and the fact that it has no transaction costs or any fees on the transfer of assets, make the platform unique.
But despite the positive response from German investors, Kern says: “We are very concerned with the legal and regulatory framework. Together with our partners, we have been seeking dialogue pro-actively with the local regulatory authorities, currently in Germany, Austria and Switzerland.”
Kern welcomes the upcoming Mifid II changes as a step in the right direction. “Wikifolio.com offers a platform where investment decisions are not strained by commissions; what counts is the performance and trading know-how of the [individual] trader,” he says. “I guess it might be possible that these regulatory changes have a positive impact on Wikifolio.com.”
The platform has become increasingly popular in Germany, according to Kern. “Almost 5% of all financial advisers in Germany are active on Wikifolio.com and have published their trading strategies,” he says. “A recent analysis showed that the greater part of all Wikifolios beat the relevant benchmark in terms of performance. In terms of risk (market risk, regardless of correlations) 67% of all investable Wikifolios and 89% of all professional advisers have beaten their benchmark.”
Switzerland
Leonteq in Switzerland has set up a product issuance cooperation agreement with the platform that will allow Leonteq to issue products linked to an index comprised of Wikifolios. “The Leonteq Wikifolio Social Trading Index is a benchmark comprising the ‘best-performing’ wikifolios meeting certain criteria like the information ratio to be eligible as underlying for the index,“ says Manuel Duerr, Leonteq’s head of public solutions.
Leonteq has already launched three tracker certificates with different currency denominations. “Usually tracker certificates are the first instance before Leonteq issues certificates with a pay-off structure,“ Duerr says. “Wikifolios are providing an interesting concept for investors; they are popular among German investors showing a decent turnover on the exchange.”
There are six rules that these "Wikifolio certificates" need to meet to be eligible for the Leonteq index which will be rebalanced on a monthly basis: a Wikifolio certificate may only invest in non-interest bearing cash facilities, equity (including ETFs, GDRs and ADRs), options and warrants on equity, currencies and commodities; must have the status "active", meaning that the trader managing the hypothetical portfolio forming the basis for the Wikifolio certificate must have logged on to Wikifolio.com at least once during the 30 calendar days preceding the relevant rebalancing date; must have an information ratio of at least 0.9; must have an outstanding total market value of at least €250,000; must be listed on Euwax; and may not have a management fee higher than 1.50% and a performance fee (high watermark) higher than 30%.
The tracker certificate on the Leonteq Wikifolio Social Trading Index (Growth) replicates the price movement of Leonteq Wikifolio Social Trading Index (Growth) adjusted by a daily accrued management fee of 1.20% pa. The tracker certificate is offered in euros, US dollars and Swiss francs (for the dollar- and franc-denominated tracker certificates the euro currency risk is not hedged).
Wikifolio.com publishes online the latest net composition of each Wikifolio as well as the entire transaction history. Wikifolio certificates can be purchased via various brokerages and all banks across Germany and Austria, as well as via Lang & Schwarz. Wikifolio.com has $100m of assets under management.
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