Netfolio

» see netfolio.com as it lived, on the wayback machine

~ the eulogy ~

James O'Shaughnessy is the quantitative investor who published What Works on Wall Street in 1997, a book that ran S&P's Compustat database over decades of market history to argue that a handful of mechanical screens beat most stock pickers. He had founded O'Shaughnessy Capital Management in 1988 and launched the Cornerstone Growth and Cornerstone Value funds in 1996. In June 2000 he sold that mutual fund family to Hennessy Advisors, and the thing he was selling it to do was Netfolio.

The pitch was that the mutual fund was a container whose time had passed. If the screens were the product, there was no reason to wrap them in a pooled vehicle where you owned a slice of a portfolio alongside thousands of other shareholders who could force sales at the wrong moment and hand you their tax bill. Netfolio would run the same selection logic and then buy the actual stocks into your own account. The marketing name for the result was a Personal Fund, with the service mark on it and everything.

Netfolio was set up in New York in 1999 and the subscription service opened to the public during 2000. It was the second company to market what the trade press was calling stock baskets, after FolioFN of Vienna, Virginia, and for a stretch of 2000 and 2001 those two were treated as the thing that was going to happen to retail investing.

~ the dossier ~

~ what a personal fund was ~

The live site from May 2001 lays out the mechanism plainly. You answered a questionnaire called the Netfolio Profiler, or you browsed and picked your own portfolios from a list. The service recommended holdings against your stated goals, you opened an account through Bear Stearns, the clearing and custody broker, and the stocks landed in your own name.

The four advantages were printed as a list on the front page: lower costs than a typical mutual fund, greater tax control, the ability to customize the portfolio, and the fact that you alone owned your Personal Funds. The subscription ran $200 a year, waived for your first year, with a further deal for members of the American Association of Individual Investors.

Underneath that, the site was doing content marketing in a way that reads as very 2001. There was a seven-day schedule of financial columns with a headline for each day of the week, running from Monday's retail-sector stock opportunities to Sunday's advice on which financial papers belong in a disaster-proof box.

~ effective friday, september 14th ~

Bloomberg ran "Netfolio Shuts Up Shop" on 5 September 2001. Financial Planning followed on the 10th with the detail that the New York company had failed to raise funding for the business and was now trying to sell itself, and that the website was expected to cease operations that Friday. The decision was therefore taken and reported in the first week of September, before anything else that month happened.

The site itself settles the date. The notice that replaced the homepage stayed up well into 2002, and it reads: "It is with great regret to inform you that due to extremely difficult market conditions, Netfolio, The Personal Fund Company, has discontinued its online investment advisory service effective Friday, September 14th." Customers holding accounts were pointed at detailed instructions for transferring to another brokerage. Subscribers got a paragraph thanking them and predicting that the Personal Fund concept would thrive in the near future.

US markets were closed from 11 September and did not reopen until the 17th, so Netfolio's last day as a going concern fell inside a week when the thing it sold could not be bought. The closure notice blames difficult market conditions and is not wrong, though the funding had already failed a week earlier. Bear Stearns, the firm holding the accounts people were being asked to move, had six and a half years left.

@}-->--

              )
             (_)
            .-'-.
            |   |
            |   |
            |   |
            |   |
          __|   |__   .-.
       .-'  |   |  `-:   :
      :     `---'     :-'
       `-._       _.-'
           '""""""

« previous  ·  random  ·  next »