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Scalable Capital

Scalable Capital

Introducing Scalable Capital

With a successful operation in Germany Scalable Capital launched in the UK in August at a time of great uncertainty and volatility in global markets which allowed it to showcase its unique proposition to best effect.

Scalable Capital uses sophisticated technology to create a portfolio of ETFs for each client based upon their risk appetite and then projects future levels of risk based on recent market activity. In contrast to traditional wealth managers it dynamically adjusts the mixture of asset classes in its portfolios to enable investors to capitalise on markets where risk is rewarded, and limit exposure to excess risk in more volatile conditions.

Scalable Capital aims to deliver an institutional class product, based upon its proprietory technology, at a fraction of the cost of traditional discretionary wealth management.

  • Sophisticated digital discretionary investment management
  • Portfolios of ETFs based on investor's attitude to risk
  • Ongoing dynamic risk-based management based on value at risk
  • Minimum investment £5,000
  • Total charge 1% - 0.75% Scalable Capital 0.25% (ave) ETF management fee
  • Desktop, tablet, iOS and Android
  • General Investment Account, ISA (SIPP late 2016)
scalable capital - intelligent investing

Scalable Capital delivers automated discretionary wealth management based upon its sophisticated proprietary technology.

In the application process potential investors are asked questions regarding their financial objectives, their knowledge and experience of financial products and their personal financial circumstances.

Subject to them being considered suitable to receive automated financial advice, the platform dynamically allocates each investor a portfolio of ETFs based upon a quantitative measure of their risk tolerance; its technology uses forward-looking projections, based on recent market developments, to measure the level of risk in this portfolio and then adjusts it accordingly.

Scalable Capital markets itself as delivering ‘an institutional class product using state-of-the-art technology, available to retail investors for the first time, at a fraction of the cost.’

It uses a professional risk measure known as value-at-risk (VAR) to determine the risk in a client's portfolio daily and to decide whether a change in the allocation is required in order to keep it in line with the client's selected risk category.

The risk categories represent the proportion of a fund that could be at risk in a really bad year; for example a ‘15% portfolio’ means that in a really bad year, there is a 95% chance that this fund won’t lose more than 15% .

There are 23 risk categories available, ranging from 3% VAR to 25% VAR and you may be able to select from all of them or a limited sub-set based upon a suitability test.

Its platform makes much of the technology that underpins it, and its risk-based approach is a key point of differentiation; as a consequence Scalable Capital feels slightly more serious than some of its rivals and it may appeal in the first instance to more sophisticated investors.

With all investing comes risk and for Scalable Capital’s method to be effective, it is important that you select a risk category that you feel comfortable with during the application process; thereafter the platform is mandated to make investment decisions on your behalf based upon the risk category deemed appropriate according to your application.

     Simple - automated discretionary wealth management service

     Flexible - General Investment Account, ISA, SIPP (late 2016)

     Secure - robust online application process, highest levels of data integrity

     Accessible - performance 24/7/365 via desktop, tablet or iOS and Android apps

     Low Fees - 0.75% platform fee + 0.25% (ave) ETF management charge

     Risk Managed - optimised portfolio created and monitored for each client

     Dynamic - ongoing risk assessment and adjustment of asset allocation

     Transparent - no hidden charges, real time view of portfolio

starting with scalable capital

The Scalable Capital sign-up process consists of an online questionnaire which allows you to set your objectives, asks you for your knowledge and experience of financial products, considers your personal circumstances and assesses your attitude to risk.

Based upon your risk profile, and assuming you are considered suitable to receive automated investment advice, you are allocated a portfolio of exchange traded funds (ETFs).

The mixture and weighting of different investments and asset classes within your portfolio will change over time as their respective risk changes and your allocation is adjusted to stay in line with your risk category.

ETFs are the highly flexible and cost-effective building blocks with which many robo-advisers build their portfolios and Scalable Capital has built a selector that monitors more than 1,500 ETFs in the UK to make sure they invest in those with the best characteristics based upon cost, liquidity, risk and tax efficiency.

 

Step 1 - Set your financial objectives

 



 

 

 

 

 

 

 

 

Step 2 - Set your time horizon

 

 

 

 

 

Step 3 - Set your attitude to risk

 



 

 

 

Step 4 - Declare your knowledge and experience of savings and investment products and services you have used in the past.

 

 

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Step 5 - Estimate your income/outgoings and also your net worth and emergency fund

 

 

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Step 6 - Receive a indicative portfolio allocation based upon your attitude to risk and the returns that may achieve over varying time horizons

 

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Step 7 - Verify your personal details including linked bank account and complete ISA application as appropriate

 

 

scalable capital in action

Once you have been assessed to have the correct personal circumstances, right level of knowledge and experience and sufficient risk tolerance to invest with Scalable Capital you will be assigned a portfolio of ETFs which is considered to be capable of achieving the financial goals you have set whilst remaining compatible with the level of investment risk to which you are exposed.

Scalable Capital deploys highly innovative technology to construct a tailor-made investment portfolio which includes projecting future risk based on recent market developments.

Each portfolio is continuously monitored and managed by proprietary risk management technology, a level of service previously reserved for very wealthy or institutional investors.

Scalable Capital has established 23 separate risk categories based on a professional measure known as value at risk - VAR; this is defined as an annual loss, which shouldn’t be breached with a probability of 95% - by way of an example, VAR 15% means that, with a likelihood of 95%, your portfolio should not lose more than 15% in value even if market conditions are very bad.

Your individual investment strategy is based on the VAR category suggested by the answers that were given during the sign up process.

Because constant evaluation takes place at an individual portfolio level, this means that two clients assigned the same portfolio on a VAR basis at different times may hold slightly different investments.

This is because existing clients are only moved to the new optimum portfolio if it makes sense in terms of maximising their returns after costs; the bid/offer spread for every trade impacts a client’s portfolio valuation although direct trading costs - of selling one ETF and buying another - are included in Scalable Capital’s fee.

Each Scalable Capital client has an individual and continuously optimised portfolio that targets the best risk-adjusted return after costs, in-line with their selected risk category.

The full universe of Scalable Capital's investments can be seen on its website and in their selection, it applies the following criteria:

Cost - a low total expense ratio (TER) - i.e. the total costs of running and owning an ETF compared with the value of its assets is considered desirable.

Liquidity - long-established larger funds which are generally easier and cheaper to buy and sell.

Low risk - generally it prefers 'physically replicated' ETFs - i.e. those that own the underlying assets - and prefers to stay away from those that engage in activities such as securities lending which can expose it to additional, 'counterparty' risk.

Tax treatment - Scalable Capital prefers ETFs that do not introduce any complex tax issues that could impact an investor.

For more information about the structure, workings and ownership of ETFs visit DIY Investor 

The representative asset allocation - the ratio of cash/government bonds/corporate bonds/stocks/real estate/commodities - that is presented during the sign up process is indicative of an appropriate portfolio over the last 15 years.

The weighting in your individual portfolio is dynamic and will change due to market movements as adjustments are made in order to target your portfolio’s specific risk level; your initial portfolio allocation is displayed when you sign up and the changing portfolio allocation and real-time performance can be viewed through the secure customer login 24/7/365 from your choice of device.

It is predicted that the next generation of digital investment managers will be able to harness the power of cloud computing to deliver infinitely individual solutions via platforms that use artificial intelligence to 'learn' and adapt as an investors requirements evolve.

Pro tem it is down to the investor to ensure that their chosen adviser is kept fully apprised of any changes in their personal circumstances, attitude or objectives.

muckler's view

Possibly because of its Teutonic heritage Scalable Capital feels serious, solid, dependable; the team mandated with its delivery in the UK is equally staunch with experience gleaned from some of the big-hitters in global financial services including Goldman Sachs.

Scalable Capital differentiates itself from the advice or guidance delivered by the new crop of robo-advisers by describing itself as an 'online discretionary investment manager'.

It does not employ any gimmicks or slick marketing ploys to get its message across, rather its website describes 'evidence-based investing', 'dynamic risk management' with security as a 'top priority'.

Scalable Capital's proprietary technology builds a portfolio of ETFs based upon projected future risk reflecting recent market activity and then constantly monitors and adjusts the asset allocation of each individual portfolio to ensure that it remains pertinent to the individual's risk profile - 'an institutional class product using state-of-the-art technology, available to retail investors for the first time, at a fraction of the cost'.

Scalable's investment process is built around the individual - understanding their financial goals, understanding their risk tolerance and delivering and constantly monitoring a portfolio of investments designed to deliver the required outcome within acceptable risk boundaries.

Because Scalable Capital, in common with many of the next generation of digital investment managers, has not been trading for a full year, under FCA rules it is not possible to report its investment performance to date.

Muckler will deliver an overview of each of the platforms based upon their ease of use, functionality and user experience.

Scalable Capital's sign up process is intuitive and the fact that it screens out those deemed inappropriate to receive automated financial advice, because they have insufficient experience of financial products or have no cash buffer, is to be commended; its risk based method of delivering an optimised portfolio can only be effective if inputs at this stage are accurate and honest.

Its pricing is transparent and the indicative portfolio and projected investment returns are simple to understand and adjust to reflect a range of scenarios; with a £5,000 minimum investment and professional demeanour, Scalable Capital may particularly appeal to more sophisticated and wealthier clients.

Its range of account types and methods of access make Scalable Capital a flexible and user-friendly choice; and it is starting to get considerable traction in the UK with almost 2,000 clients and attracting £3m in assets under management every week.

 

Muckler thinks Scalable Capital is good for;

 

     Those looking for a simple, discretionary wealth management service

     Delivering an individual portfolio based upon objectives and risk

     Sophisticated investors comfortable with the concept of value at risk

     Experienced investors looking to reduce their cost of investing

     Those new to investing looking for a one stop shop

     Establishing a long term, tax efficient, investment regime

     Those looking to make regular investments into a personal pension 

Scalable Capital on Muckle