The last few years have seen tech infiltrate retail investing. Long gone are the days when you needed to set up a brokerage account and pay expensive fees. Several innovative companies have emerged such as commission-free trading app Robinhood or Robo-advisors such as Wealthfront and Betterment, which charge much smaller management fees than most traditional fund management platforms. However, whilst many millennials have flocked to these platforms and some have gained positive returns by trading themselves, the lack of understanding of things such as leverage, has led the majority to be on the losing end of the stick. One millennial raising a fund to offer a better solution, mixing the old and the new, is Haris Khurshid, founder of Fate Capital Management.
Haris attended Michigan State University where he studied Economics, then furthered his education at Columbia University, where he studied Finance. However, neither of these places taught him the concept of investing, “there were really no classes focused on investing. There was accounting, finance, and economics, which are all important – but nothing on investing”.
He figured he had to create a self-study program if he wanted to learn investing and the best way to learn was by doing, so he opened up a brokerage account and started investing, “having actual capital at risk really is the best way to learn” he says. Although he didn’t have any mentors for guidance, he says investing is something that can be self-taught, “I learned the most from reading and some of these authors were mentors to me, in a sense. You can learn a lot from someone without ever meeting them.”
Upon graduation instead of going to work for a fund manager, Haris decided to go the unorthodox route of working in multiple industries to learn how companies operate from different angles i.e. from investment banking to management consulting to private equity, “I wanted to approach investing my way, rather than simply adopt someone else’s investment style and in that sense, all my moves were quite strategic in shaping my investment philosophy.” These different experiences allowed him to experience firsthand how companies operate from the inside out. After which, the final move Haris felt he needed to make was somewhere he could mold together all that he had learned and execute. This led him to take up a role at a venture-backed startup, leading their finance and corporate strategy team.
Through all of these experiences, Haris continued developing his investing strategies and also transitioned his portfolio from direct equity investing to options. This transition led him to realize the amount of money people were simply ‘leaving on the table’ by overlooking this relatively simple strategy of collecting premiums. While investors can trade options themselves on platforms such as Robinhood, only a few can afford to sell (or write) options to collect premiums. To do this investors would either have to purchase 100 shares of a company such as Amazon or Facebook (which could get quite expensive) and even fewer can afford to risk trading on margin, due to lack of knowledge and the risks involved.
When COVID-19 hit in early 2020 he noticed many of his friends ended up being laid off, which forced them to liquidate their portfolios to meet their short-term obligations such as rent, mortgages, and car payments. “This made me realize, investing for the future is something that our generation really procrastinates on and this pandemic has shown us how important financial management is regardless of age”.
This is when Haris got the idea for Fate Capital – realizing he could launch a fund that would provide investors with an additional passive income stream, without them having to deviate from their long-term financial plans. The fund will pool investors’ money, allowing the collective enough buying power to purchase 100+ shares of high-quality businesses creating a long-term portfolio, then simply collect premiums on these holdings – all while this portfolio appreciates in value over time. This allows the average retail investor to invest in an actively managed and long-term focused fund while taking advantage of additional income via premiums. Alongside this, very few managed funds exist for smaller investors to take advantage of premium collection, if any.
“And it’s not as simple as it sounds, there is no such thing as easy money. You might write a contract on a long-term holding and all of a sudden it’s in-the-money (meaning it can be exercised by the buyer and you won’t own the stock anymore), and to prevent that from happening, you have to adjust your position by turning it into a spread and this is where things get slightly more complex.”
Fate Capital has no management fees and only takes performance fees after a 5% hurdle rate (meaning investors are always paid at least a 5% return before Fate Capital). He achieves this zero-fee structure by minimizing the overheads a traditional fund would have by having a remote workforce and utilizing readily available technological solutions.
Fate Capital started raising money in earnest about two months ago and has raised approximately $12 million so far. The fund is currently open to new investors with a soft close approaching towards the end of the year.
To receive updates and learn more you can sign up here.
(Syndicated press content)
