The Mystique of Alternative Assets
The idea that the wealthy have access to superior investment opportunities that the rest of us have been missing out on and can finally access through Titan is enticing. So are Titan’s investor updates and videos—all of which, keep in mind, are marketing materials. It’s important to keep a level head when evaluating whether what Titan offers makes sense for your financial circumstances and goals.
Potential Underperformance from Active Strategies
Investment performance depends on the period examined. But with a track record of almost five years, Titan’s Flagship strategy had underperformed the S&P 500 by 10.3 percentage points as of April 2023.
Flagship’s annualized returns since inception were 9.2%, vs. 10.5% for the S&P 500. And Flagship had 37 months of positive returns vs. 41 for the S&P. The fund delivered the opposite of its stated goal: To outperform the S&P over a three- to five-year period.
From June 2022 through May 2023, Flagship bettered the S&P 500 by nearly five percentage points. It’s anyone’s guess whether this outperformance will continue.
Titan’s Offshore fund had lost 27.7% over its 25-month history (as of April 2023) while the MSCI ACWI ex-USA had only lost 6.6%.
The Opportunities strategy fared better. Over 33 months, it returned 23.5% compared to the Russell 2000’s 15.4%, with annualized returns of 8.1% vs 5.4%.
With a 21-month history, the Crypto strategy had lost 38.2% after fees. Bitcoin’s value declined by 35.9% over the same period while ETH lost 40.5%, for an average loss of 38.2%. A direct investment would have seemingly produced the same results as investing through Titan.
But Titan Crypto was not allocated 50/50 to Bitcoin and Ethereum since inception. It previously invested in various altcoins and fully sold off those positions in March 2023.
Potential Conflict of Interest
Under SEC rules, registered investment advisors such as Titan have a fiduciary duty to serve their clients’ best interests. But Titan earns more by recommending that you allocate more of your money to its active strategies than its passive strategies. It also earns money when you invest in partner funds.
Yes, the fee decreases as your assets held with Titan increase, but that hardly matters. The point is that Titan’s fee structure appears to create a potential conflict of interest.
Even though Titan meets the SEC’s legal definition of fiduciary duty by disclosing its conflicts of interest, a more rigorous fiduciary would not profit from recommending specific investments.
Expensive, Illiquid Investment Options
The alternative asset funds available from Titan’s partners only allow quarterly redemptions and limit the percentage of the fund’s total shares that investors can redeem per quarter. If there’s a major investment crisis, you dislike the fund’s performance, or you need some cash, you might be up a creek.
For example, a Titan investor update from May 23, 2023, notes that some clients invested in the company’s offshore strategy can’t get all their money out because shares of Yandex can’t be traded due to the Russia-Ukraine war.
Quarterly liquidity is an improvement over the usual lock-up period for, say, a traditional venture capital investment—which could be seven to 10 years or longer. But that’s not what the average investor is used to, which is the near-instant liquidity provided by the secondary markets for publicly traded investments like high-volume stocks and ETFs.
These funds also have high fees, and one of them—the ARK Venture Fund—has a track record of just seven months.
If you want to invest any significant portion of your savings in Titan’s partner strategies, you would be wise to read the prospectus and consult an independent financial advisor.
Steep Learning Curve for Partner Investments
If you don’t have a background in private credit, venture capital or private real estate, there’s a lot to learn. Just because deep-pocketed individuals and institutions put money into these types of investments doesn’t mean they’re right for you.
The allure of earning higher returns through exclusive investments is strong. But investing in things you don’t understand can mean taking on risks that may be too high for your situation.
Titan’s articles, videos and webpages do a decent job of explaining unfamiliar investment strategies to the average retail investor. But there’s less publicly available research on these types of investments and they’re not as tightly regulated. Proprietary strategies and less regulation can contribute to higher returns—but they can also contribute to large losses.
Review the prospectus for any of Titan’s strategy or partner investments before you dive in. See how much of it makes sense to you. If your eyes are glazing over by page two, an asset class like private credit may not be right for you.
Limited Customer Service
Live chat is available from 9 am to 6 pm Eastern, Monday through Friday, or 6 am to 3 pm if you live on the West Coast. You can also email [email protected]. Titan does not appear to offer customer service by phone, which some users may find frustrating.
No Financial Planning Resources
While Titan will recommend an asset allocation across its own strategies and partner funds, the company does not have financial advisors who can help you with things like choosing a 529 college savings plan, evaluating life insurance policies, calculating how much money you need to retire or formulating a retirement drawdown strategy. For that, you’ll have to work with an outside financial planner or a firm like Facet.