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Titan Flagship Review: Outperform the S&P 500?

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Titan is an asset management firm that is somewhat a mix between a robo-advisor and an actively-managed investment fund as investors hold a portfolio that is managed to outperform a particular index.

Its Titan Flagship strategy was launched in 2018, and since then, it has produced attractive returns. This is achieved by pooling the master portfolio into a handful of companies that the team deems as the most promising based on an assessment of their current situation and prospects.

In this article, we dig deeper into the characteristics of this Flagship strategy for investors who might be considering the possibility of opening an account with Titan. 


What is Titan? 

Titan is a robo-advisor that offers investors access to four different investment strategies that seek to deliver above-market returns.

The Titan Flagship strategy focuses on US-based large-cap companies that have solid management and durable competitive advantages. This strategy competes with traditional large-cap indexes like the S&P 500 and other similar broad-market benchmarks for this category.

The Titan Opportunities strategy focuses on US-based small and mid-cap companies with attractive growth potential. Its objective is to outperform the well-known Russell 2000 index over a 3 to 5-year period.

The Titan Offshore strategy focuses on market-leading companies based outside the United States and exposes investors to the beta-rich returns offered by emerging and developed economies.

Finally, the Titan Crypto strategy focuses on the native tokens of a handful of blockchains to take advantage of the rise of this technology and its potential to become the next frontier for digital solutions.

Titan charges a fixed percentage fee for investors with more than $10,000 in assets and a fixed annual fee for those with a lower account balance.

The Titan leadership team is made up of seasoned industry professionals, including its founder and Co-Chief Executive Clayton Gardner, who has a strong background at buy-side investment firms, including a successful career as an investor at a multi-billion hedge fund. Check out our full Titan review to learn more.

Titan Homepage
Source: Titan

What is Titan Flagship?

The Titan Flagship strategy focuses on large-cap US companies whose market capitalization exceeds $10 billion. Here are more details about the criteria followed to build its portfolio and what investors can expect from it.

Strategy

The Flagship portfolio is typically comprised of no more than 25 individual stocks — which makes it a concentrated portfolio — from large-cap companies with strong fundamentals, growth prospects, and durable competitive advantages.

This portfolio’s holdings are selected after the team performs thorough quantitative and qualitative research on every potential candidate. The process involves reading and analyzing the company’s financial filings, research reports about the markets in which the company participates, and other similar materials.

Ideally, the team seeks to invest in businesses that can deliver an annual return of 15% or higher in a period of at least 3 years based on an estimation of the company’s intrinsic value versus its stock market price.

The portfolio is typically equally-weighted, meaning each stock in a portfolio or index fund is proportionally measured and given the same importance, regardless of a company’s size. Turnover rates should be low, and periodical rebalances will take place if one position deviates significantly from its target weight. 

The Flagship strategy follows an active approach as portfolio managers are allowed to add and eliminate individual stocks at their discretion. Therefore, benchmark comparisons only illustrate the strategy’s capacity to deliver alpha-rich returns following a beta-neutral strategy.

Titan Flagship Key Facts
Source: Titan

Index Tracking

Being a large-cap-focused strategy, Titan Flagship aims to beat the well-known S&P 500 index — which is comprised of the 500 largest US-based publicly traded companies by market capitalization. 

The S&P 500 is a market-cap-weighted index, meaning that the stocks with the largest market capitalization get a higher weight. 

According to Flagship’s prospectus, the strategy has remained beta-neutral since its inception, meaning that its systematic risk is the same as its benchmark — in this case, the S&P 500.

The team at Titan has managed to reduce the size of its portfolio to the point that it will be affected by macro factors in the same way as the S&P 500 while delivering above-market returns through the selection of what they believe are the most promising individual stocks.

Top Holdings

Even though Titan is not as secretive as hedge funds typically are about their portfolio’s composition — they constantly claim they are not a hedge fund — they don’t disclose their holdings to the general public either. 

Instead, investors who have opened an account with the company can track their portfolio’s composition in real-time, and that is the only way to know what the Flagship fund is currently investing in.

In the specific case of Flagship, Titan says that the portfolio is comprised of 15 to 25 individual stocks. Since this is an actively-managed strategy, investors can expect a higher turnover rate compared to passively-managed vehicles such as index-tracking funds.

Only by signing up with Titan will a user be able to see what it is that they are investing in at a certain point in time. 

The Flagship strategy focuses on companies with strong fundamentals and appealing growth prospects. Since most of those businesses nowadays are found in up-and-coming industries like technology, biotechnology, and renewable energy, companies such as:

Performance

The Flagship strategy was introduced in February 2018. This means that it is quite young, and its performance data doesn’t go as far as it should to conclude if its approach is successful at delivering alpha-rich returns in the long run.

So far, the cumulative return of Flagship from February 2018 to October 2021 is 98.6% compared to 81.3% the S&P 500 has yielded. Meanwhile, on an annualized basis, Titan’s Flagship has produced gains of 20.4% compared to 17.5% the S&P 500 has generated.

This results in a 3% alpha while the beta metric was 0.99 — meaning that Flagship’s systemic risk was almost the same as that of the S&P 500. 

That said, considering that Titan charges a 1% annual management fee to investors with over $10,000, that alpha has mostly been eaten by the company’s management fees.

As I stated previously, Titan’s Flagship has been around for less than three years, and it is still too early to tell if the strategy is alpha-rich or not.

Titan Flagship Performance
Source: Titan

Minimum Investment & Fees

The minimum investment required to open an account and invest with Titan is $100.

Meanwhile, the company’s pricing is straightforward. Investors with over $10,000 in assets are charged a 1% annual management fee while those with a lower balance pay a fixed $5 monthly fee.

Hedging

Titan understands that every investor has a different risk tolerance. Therefore, even though the portfolio composition of Flagship remains unchanged regardless of this factor for every investor, the degree to which the portfolio is hedged does vary from one investor to the other.

For Flagship, Titan uses an inverse S&P 500 ETF to hedge an investor’s position. Depending on the risk tolerance of each account holder, here’s how hedged the portfolio is.

If Titan’s team thinks that the market is not on a downtrend, aggressive investors are not hedged at all, while 5% and 10% of the portfolio of moderate and conservative investors is hedged, respectively.

Meanwhile, if the team thinks that the market is on a downtrend, the percentage of the portfolio that is hedged for aggressive investors is 5%, while for moderate and conservative investors, that percentage increases to 10% and 20% of the total portfolio respectively.


Pros of Titan Flagship

  • Low minimum deposit.
  • Competitive annual management fees (1%).
  • The portfolio is hedged based on each investor’s risk tolerance.
  • The Titan team’s stock-picking skills could deliver alpha-rich returns.
  • The strategy has remained beta-neutral since its inception.

Cons of Titan Flagship

  • The flagship strategy was introduced in 2018. Its track record is too narrow to conclude if its methodology can deliver alpha-rich returns in the long run.
  • Thus far, the strategy’s post-fees performance is equal to that of the S&P 500.

Who is Titan Flagship Best For?

Titan’s Flagship is suitable for investors with a moderate to aggressive risk tolerance and who don’t need to generate a steady stream of income from their investments to cover their living expenses.

It may also be a good choice for those who are starting to build a retirement fund or any other similar fund such as their kid’s college fund or a first-home down-payment fund.   

In A Nutshell

  • Account Minimum: $100 ($500 for retirement accounts)
  • Fees: $5 per month (accounts < $10,000) and 1% AUM (accounts > $10,000)
  • Promotion: None
Titan

on Titan’s website


FAQ Titan Flagship

The following is a selection of the most frequently asked questions we get about the Titan Flagship strategy.

How Does Titan Rebalance Portfolios? 

Titan periodically rebalances the weight assigned to each individual stock that comprises the Flagship portfolio. According to Titan’s team, the portfolio is commonly rebalanced when a certain holding enters or exits the portfolio to reduce the number of taxable events for investors.

Does Titan Flagship Support IRA Accounts? 

Yes. Titan supports individual retirement accounts (IRA) and they believe they are the perfect vehicle to invest in any of the strategies they offer due to the advantageous tax-related conditions these accounts offer.

How Do Fractional Shares Work with Titan Flagship? 

Titan is not a fund. Instead, its proprietary software builds a portfolio that tracks the master portfolio of the Flagship strategy by using fractional shares to fully invest the entire amount that the investor has deposited into the account.


Final Thoughts

Titan is part of a growing group of companies that have revolutionized the way the asset management industry functions. By introducing actively-managed strategies that seek to deliver alpha-rich and beta-neutral returns, the company has positioned itself positively to become a strong alternative to the passively-managed funds most investors are used to investing in.

Even though Flagship is still young and has a lot to prove, the results thus far have been quite good.

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