ValuEngine Offers Money Management On Top Of Research

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Recently, Melbourne Florida-based quantitative research firm ValuEngine, formed a separate registered investment advisory firm called ValuEngine Capital Management to provide investment management services to retail clients based on ValuEngine’s time tested independent research.

The Investment Strategies Provided
ValuEngine Capital Management (VCM) initially rolled out three (3) different portfolios based on unique strategies developed by ValuEngine reflecting the risk-reward profiles of different investors. These strategies include the ValuEngine View Strategy, the ValuEngine Market Neutral Strategy, and the ValuEngine Diversified Strategy. ValuEngine View Strategy: The ValuEngine View Strategy is the product of a sophisticated stock valuation model that was first developed by ValuEngine’s academic research team. It utilizes a three factor approach: fundamental variables such as a company’s trailing 12-month Earnings-Per-Share (EPS), the analyst consensus estimate of the company’s future 12-month EPS, and the 30-year Treasury yield are all used to create a more accurate reflection of a company’s fair value. A total of eleven additional firm specific variables are also used. The ValuEngine View portfolio is constructed by integrating both ValuEngine’s Aggressive Growth—based on the VE Valuation Model – and Diversified Growth — based on the VE Forecast Model – Portfolio Strategies. The ValuEngine View Strategy is constructed by integrating this model along with some basic rules for market capitalization and industry diversification. The portfolio has 15 stocks and is rebalanced once each month.

ValuEngine Market Neutral Strategy: The ValuEngine Market Neutral Strategy is the product of ValuEngine’s Forecast Model. This model was developed by a team of PhD’s and is based on the cutting edge economic theories of Wall Street professionals and Ivy League academics. ValuEngine examined dozens of fundamental and technical factors for over 8,000 individual stocks, synthesize the data, and then come up with a sector-diverse list of their best and worst forecasted 1-month return stocks. Short and long-term historic factors in the VE Forecast model’s calculation include past-valuation levels of the stock and its recent price-momentum factor relative to other stocks. The ValuEngine Market Neutral Strategy utilizes Forecast Model outputs along with market capitalization, price, and sector diversification rules to construct a monthly portfolio made up of 16 stocks for both the long and short sides.

The ValuEngine Diversified Strategy: The ValuEngine Diversified Strategy invests in a variety of asset classes in order to provide investors with stable returns and a high- dividend yield coupled with significantly lower risk than single-asset products. The ValuEngine Diversified Strategy may include ETFs focused on commodities, stock indices, REITS, bonds, emerging markets, and other suitable products. By reaping the benefits of diversification, the ValuEngine Diversified Strategy seeks to remain resilient during times of market volatility. The ValuEngine Diversified Strategy is designed for investors seeking management for their IRA and other retirement funds as well as those whose risk-profile is not suitable for VCM’s other strategies.

VCM is targeting retail customers with a minimum $20,000 to invest, and fees for VCMs management services run 1.5% of assets invested. In addition to receiving professional investment management services, VCM clients all receive a complimentary subscription to VE’s proprietary research services.

Rationale for This Move
ValuEngine (VE) is a stock valuation and forecasting service founded by Ivy League finance academics and Wall Street professionals in 1996 which forecasts more than 5,000 stocks, REITS, ADRs, and foreign stocks actively traded on US exchanges. The service has traditionally been available to retail and professional investors who subscribe to it from the ValuEngine website (

For the past 15 years, ValuEngine has toyed with the idea of providing clients the ability to directly invest based on their research. Unfortunately, life as a small business always got in the way. However, after the market crash of 2008, retail investors became less interested in conducting their own investment research, settling on the free information available from Yahoo Finance or Google. Consequently, as individual subscriptions plummeted, ValuEngine looked for other ways to grow its business of serving retail investors. This led the firm to start aggressively licensing its research to large banks and brokerage firms who then redistribute it to their retail clients. A few of these partners include Wells Fargo, Scotia Capital, and Fidelity. While investors were not interested in paying for third-party research services, they did indicate that they were more open to a “full-service” offering bundling both ValuEngine’s independent research services with money management. Hence ValuEngine Capital Management was born.

Our Take
While it is still too early to tell whether VCM will be a success, in its early days management says that they are finding it much easier and more lucrative to set up new money management accounts than it is to sell research. Of course, providing money management is substantially more expensive an undertaking than just providing research given the regulatory, compliance, and customer support overhead required. In addition, the money management space is an extremely crowded one with thousands of traditional active managers, and the plethora of much cheaper passively managed investment products. However, VCM does not need to attract billions of dollars in assets under management to make it a success for ValuEngine. Rather, VCM just provides another way for ValuEngine to commercialize its valuable research IP. The interesting question for us is whether other independent research firms will try to diversify their revenues by getting into the money management business. We will wait and see.


Author: ValuEngine Capital Management

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