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Rating:An Automated SMA Contender Joins the Fray Not Rated 0.0 Email Routing List Email & Route  Print Print
Thursday, October 28, 2004

An Automated SMA Contender Joins the Fray

Reported by Theresa Sim

Clear Asset Management Founder Andrew Corn has a vision, and it looks a lot like the computer sitting in front of you.

Corn founded the New York, New York-based firm on the idea that technology has progressed so far that computers can do a better job of picking stocks than humans can. The asset manager recently launched six separately managed account equity portfolios based on that idea.

But the human touch is not entirely removed from the process. Osman Arain, a portfolio manager at Clear, was the lead designer behind the algorithms that screen more than 10,000 U.S. stocks.

"Our portfolios will demonstrate that in investing as in chess, we've reached the point where well-designed and constantly improved software will outperform the finest individual minds," stated Arain.
Although Corn says that Clear is open to changing the algorithm behind the stock selection, he adds that "it would take a lot of proof to me to get us to change the algorithm." And the algorithms are not made public, although each portfolio's holdings are available to investors as well as reasons for selling or buying stocks.

The technology is not the only novel idea behind Clear's SMAs.

Corn argues that Clear's SMAs have several benefits compared to other SMAs, including a lower minimum investment, direct availability, and more transparency.

Investors are notified via email whenever the composition of a portfolio changes. Clear also sends a weekly letter summarizing all of the portfolio's activity. Each portfolio contains approximately 20 to 25 holdings.

Compared to mutual funds, Clear's SMAs are different because of their investment theory and commitment to investment style, says Corn. "We think computers can do a better job than people in selecting and managing stock portfolios," says Corn. And unlike some funds, "you'll never find style drift, we don't chase performance…[there's] no derivatives, no securities overlap," says Corn.

Investors can then exclude any stock for any reason on a ticker-by-ticker basis, or by sector, says Corn.

Although the company has not signed on with managed account platforms, "we're not opposed…if Merrill Lynch wants to put our portfolio in their wrap fee program, we wouldn't be saying no," says Corn.

Clear is working with third party marketers and is currently selling directly online. Corn plans on placing online ads later on down the line.

The cost of Clear's product ranges from 80 to 200 basis points, depending on the amount of money invested. The minimum investment is $25,000 per portfolio.

Currently Clear is run by a full-time staff of eight employees, as well as some interns and part-timers.  

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