On more than one occasion, Indexa has defined its success as a circle, where lower charges allow offering a greater return to its customers; that gives the company the chance to grow in volume and hence lower the charges even more. This wheel has been spinning since Indexa was launched at the end of 2015; it has made that Indexa Capital achieve profits in the third quarter of 2019, gaining a position as the first profitable independent automated investment manager in Europe, and the second one in the world (after Betterment has announced that it has already been profitable since June 2019).
When Indexa released its portfolio management service, it did it with dramatically low charges, “Our charges were less than half of our European counterparts, Nutmeg, Scalable or Moneyfarm. We aimed to develop a business with a sufficient managed volume to be able to charge the lowest fees. This is what we then called our success circle, or our customer circle.”
Indexa achieves this milestone a year before than the original plan, according to one of its co-founder and co-CEO, Unai Ansejo, “Our plan was to achieve profitability at the end of 2020, with a managed volume of 250 million Euros, and an average management fee of 0,20%, and annual revenues of 500 thousand Euros.”
François Derbaix, co-founder and co-CEO of the company, highlights the welcome by the customers, “It has been quicker than expected. The word of mouth is working better than what we had planned, and we have been able to have a profitable business since the third quarter of 2019, with a quarterly profit of 18 thousand Euros before tax.”
KEY TO SUCCESS OF INDEXA CAPITAL
The automated investment services which started before them in the United States (Wealthfront, Betterment) or in Europe (Nutmeg, Scalable, Moneyfarm) based their growth on a high capital investment (between 66 million Euros in capital investment in Scalable and 275 million Dollars invested in Betterment). Indexa was developed with a total investment of 2.6 million Euros. According to Ansejo, this has been achieved “Through a strategy to maximize efficiency in capital and to control costs internally, together with our strong growth.”
CIRCLE OF SUCCESS
Achieving profitability means positioning as a more solid and tenable company in the long term; Indexa highlights that the news is not good just for its partners, but also for its customers since, as confirmed the company, “We will lower the fees of various of our services from January 1, 2020; for our portfolio management services we will lower the fees for accounts from 10 to 100 thousand Euros (43% of the managed volume), also the management fees will be lower for our fund of index funds accessible through Renta 4, Indexa RV Mixta Internacional 75 FI, from 0.37% to 0.35% per year”,
“The greater impact will be in the lower charges for accounts from 10 to 100 thousand Euros, which is where we have the biggest managed volume. These accounts total over 88 million Euros. We will lower 0.02 percentage points in charges per year; this is equivalent to a 4.4% reduction of our charges for these accounts, and a 2% average reduction of the total fund accounts managed by Indexa. In Euros, this reduction means more than 17 thousand Euros per year on lower charges and greater profits (or fewer losses) for our customers” underscores Derbaix.
This is the eighth reduction of costs and charges since Indexa started its activity in 2015 (see Indexa lower of costs and charges history).