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If you’re here then you may have noticed that CFDs Weekly is no more.
After two weeks of setting up redirects and almost having a heart attack because I thought I’d lost my mailing list, TradeInformer is now live.
The newsletter (why haven’t you signed up yet?) will stay the same but the new name will make it easier to cover other parts of the industry.
And as if to illustrate that very point, we are celebrating our new name by giving you an interview with Heloise Greeff. Heloise is one of the most popular copy traders on eToro and we discuss what that’s like and how it happened. Enjoy!
DK: Can you talk about how you ended up becoming a popular investor? Did you have some background in finance or was it just a hobby, how did it happen?
Well the way I got to eToro was, I was working for a startup in Kenya and decided to come back to Oxford to do a PhD as a mature student. I was then very concerned at that age that I wouldn’t have a pension and started worrying about all the other financial things people start to get concerned about.
I joined eToro in 2016 after reviewing a bunch of other platforms and naively thought I could be doing it better than paying somebody else 1%. That’s basically how I got started. And then in 2019, eToro approached me and asked me whether I would make my portfolio public because they thought it was doing well.
So up until that point, it was just for me, just a few friends and family knew about it, but it wasn’t public at all. And so I made it public in 2019 and it just sort of took off from there.
DK: So how does how does that work? When you say it took off, was that a function of marketing or something similar that meant people found out about you and wanted to copy?
I think the social trading platform industry or whatever you want to call it has changed a lot since I joined in 2016. I think the next revolution happened in 2020 and 2021, when a lot of retail investors joined the platform and it became more viable for popular investors to actually make a living from their portfolio.
You are seeing some people with more traditional finance backgrounds as a result of that, but I would say, I think those of us who have been around for a long time, we never really joined with that purpose. It wasn’t our goal to have a big following because that wasn’t really possible when we started. It was more that eToro seemed like the best platform in terms of providing access to markets and so it’s sort of a happy coincidence that we have developed a large following.
So I would say the growth comes from having a long track record. I think you still can’t beat that. Even if you join today, with so many more people on the platform compared to when I joined, it would not be easy to immediately get people copying your portfolio. So having a long track record helps to put some backing behind the things I say. That was true even by 2019, when I made it public, I already had a three year track record. And I would say in general there seems to be an inflection point where people see you are doing well and are more interested, and there is no real way to speed up that process.
After 2020, there were a lot of financial influencers who tried to join the platform and bring some of their following from other platforms and then weren’t always able to put the performance behind some of the things they were talking about, so that didn’t work out for them.
DK: To change tack a bit, if I look it your portfolio, I would say it’s fair to describe you as a growth investor – do you think that’s the case? And given we are now in a very different environment to two years ago, are you having to change how you invest?
Before the pandemic I was invested heavily in US health and tech stocks, mostly because that’s my background. I did biomedical engineering, I was doing a PhD that was heavily focused on machine learning, and so it was like the things I understood that I invested in.
But since then I would say I’ve got a much better understanding of portfolio construction and those sorts of things. So I’m still invested largely in US but it’s much more diversified than it was. Partly that’s because of changes in the markets but partly because I’ve changed how I think about investing as well.
DK: Ok, so if you look at the fund management space, you do have a lot of similar approaches to market and herd mentality type behaviour. But even taking that into account, you may have a manager that has almost no interest in macro – they’ll say we look purely at cash flows, valuations, and corporate governance, for example. Others might take a different approach and be more guided by macro trends. How do you think about this stuff?
So as I mentioned, I’ve got a background in machine learning and AI, which now is obviously super commonplace.
But in 2016, when I started the portfolio, not many people were using that as part of their both technical and fundamental analysis. So that does play a huge role in how I do my analysis.
So I built a set of algorithms in 2016 and those help do a lot of the heavy lifting, in terms of filtering out what companies I should be looking at or different trends. That’s also been really necessary because I haven’t had a team of analysts or something helping me to make investment decisions.
DK: Do you have a team now?
Yeah, so I was one of the few elite pros, which means we have more than 10 million assets under copy, who still had a full time job until last August. After that I left my research position at Oxford to pursue this full time.
So I have a small team of analysts and marketing people. Some of them are part time, so it kind of fluctuates between 4 – 6 people. But it’s early days.
DK: How does it work? Do you just get a percentage of whatever you have under copy?
I’m not exactly sure what the tiers are at the moment, I haven’t looked at them recently, but based on your number of copiers and your assets under copy, you get a percentage of that which is paid out monthly.
DK: Okay, so one of the things I find interesting with copy is that you are fairly unconstrained, at least in theory. So if I think of a fund manager investing in Asia, they may want to have a zero weighting to China but for various reasons are just unable to do that because of their benchmark. Then you may have to worry about other stuff, so if I have a large amount of AUM, a large proportion of the small or even mid-cap universe might be off limits to me because of liquidity constraints or an inability to take positions where you are a major shareholder. On the other hand that might be annoying. Something I absolutely hate, for example, is when people, usually passive propagandists and ETF shills, compare everything to the S&P 500, even if the portfolio being examined has absolutely no relationship to it. But if you have no benchmark, I can imagine people doing that. So my question here is whether you think there are benefits to being a copy trader relative to being a fund manager and vice versa?
So I think as a standard protocol, eToro uses the S&P 500 as a benchmark for all of their popular investors, regardless of your strategy or what you’re holding, which as you point out, can be a benefit or, you know, really painful.
In terms of guidelines or regulations or things that the portfolio needs to adhere to, there’s certainly a lot fewer than fund managers would have. However, there are still some rough guidelines. At my level, it’s not really something to consider because I think it’s common sense and good protocol, like keeping a risk score, keeping regular communication with your copiers, having a mandate on your page, so people know what they’re signing up to.
But within that, what I can and cannot do is sort of just bound by what’s available on eToro. And then of course, when you get to a certain size you do run into some liquidity issues sometimes, which eToro supports as much as they can, but of course, if there isn’t anything in the market, then you can only do so much.
DK: This may be a vague question but is there anything that has happened since you started as a copy trader that has surprised you? Things that you just wouldn’t have thought of when you started out?
Two things spring to mind. Firstly is, I think everybody, including eToro themselves, probably did not expect liquidity to become an issue for popular investors. So I remember they had to cap AUC at some points because of that.
So, yeah, because the popular investor program historically was one of many things they offered, I think they also didn’t know copy trading was going to become this popular, even though it was quite aptly named. So one thing would be liquidity, definitely.
But then the second thing for me personally, that I found, was prior to becoming a popular investor, one of my disciplines was depositing every month and when I opened the portfolio to copy traders, I kept doing that.
And I mean, just to give you some background on how this works, if I deposit, my copiers will receive a notification to say that Heloise has deposited 2 percent or 5 percent or whatever the percentage comes to, would you like to do the same?
Now then the question becomes what happens when people don’t deposit? Do they get out of sync with the portfolio? Do they stay in sync with the portfolio? So that’s not an eToro specific problem. It’s sort of like a mathematical problem that’s inherent to copy trading.
And so I did have to stop depositing like a year or a year and a half after going live because communicating with investors became a logistical nightmare, where I was having to explain to people, ‘no you don’t have to deposit’ and ‘this is why I am depositing’ and so on. I think it’s something eToro is working on but, like I say, I think it’s almost inherent to the system.
DK: I’m curious if you have any problems in terms of people being interested but perhaps expressing scepticism. So that might be because of doubts about copy trading in and of itself. Alternatively, I look at how stock trading is facilitated on eToro, and to be honest, the way that is facilitated is just weirdly untransparent to me. Do things like that crop up?
I think there’s a larger issue that comes with being a popular investor which is just general financial scamming that happens. I’ve had people imitate me on social media and offer some Bitcoin scheme to somebody.
But I mean that can happen to anybody who’s got a social media presence. To be honest I think part of the reason I like eToro is the transparency that comes with it. So if I look at what David is investing in or what I am investing in, there is no hiding.
And so I think for me personally, that’s more important when we’re talking about an era of retail investors educating themselves. And for me, the transparency that the platform offers trumps many of the other barriers which still exist in a lot of other parts of the financial sector.
And to add, I have never tried or told anybody to copy me. In fact, it’s the opposite, where I have told people not to copy my because if you don’t get what I am doing and you don’t understand investing, then you shouldn’t be doing it.
DK: You have a decent track record. Everyone can see your portfolio now. I’m curious if that means you get offers to actually run a fund, whether that’s something like a UCITs fund or even to move over to another copy platform?
Yeah, I’ve had plenty of offers to move over to sort of like bespoke hedge funds or to move over to other platforms that offer copy. So I do get them but, as I said, I like the transparency on eToro and haven’t found another platform that offers that.
DK: So on the transparency point, I can right now go and look at your exact positions, the P&L on them, what weighting they have in your portfolio and so on. This is actually a lot more transparent than fund managers, who may only have to provide an update once a month, and even then will only have to publish a limited amount of information, like their top 10 holdings for example. On the other hand, it’s almost like you have the liquidity of a closed-ended fund but with the redemption facility of an open-ended fund, which could be extremely difficult to deal with. Plus, the reason managers may only publish limited information is because it’s their ‘secret sauce’ – so is there anything annoying about having to give that information away?
No, I mean, I think that’s the whole thing I’ve been saying about the transparency of the platform. It is the point that everything is open. It is about the accountability, compared to say only publishing things intermittently and framing them in the best possible light.
I think one of the great things about eToro is the transparency because it has made me a better investor because I’m accountable to so many people and I’m having to sort justify that in real time. And if I make a mistake, I’m held accountable for it. I can’t sweep it under the rug. And to me, that’s the future of finance. That’s the piece that has been missing is that transparency and accountability and that really builds trust with the new generation.
DK: One of the anecdotal observations I’d make about my time at a stockbroking platform was that people were either interested in buying passive products or investing directly in companies themselves. They weren’t that interested in funds. My sense is that, part of the reason for that, is people don’t like the idea that fund management is a business. But the reality is that it is and it involves all the normal things that running a business does, so sales, operations, marketing and so on. If I look at copy, one of the things I mentioned as being annoying is how liquid it is – it is very easy to exit a copy position. So that means you need retention. Then you want more assets under copy. That means marketing. Given the manner in which this has ended up being your job, I’m presuming this is stuff you’ve had to learn on the go?
Yeah, 100% – it definitely wasn’t something I thought about. And I think in 2020 and 2021, I mean, the whole retail investor space was growing. So marketing and retention wasn’t really something that was important because money was flowing into capital markets from the retail investor space anyway.
It is definitely frustrating sometimes but then I think it comes down to education in a lot of cases. I think it’s the whole philosophy and the ethos of social trading and you either want to invest that way and you find it comfortable or you don’t, but it’s about that collective knowledge. I think now I see my role a lot more as sort of like educating and communicating with investors, rather than just being an investor, so that they can make up their own mind as to what the right decision is.
You know, I’m not a financial advisor, nor do I want to be one. So it’s just about making sure that all the information is available and people can make an informed decision. And that’s also exactly why I started investing on my own was because of what you’re saying.
I didn’t want to pay somebody a percentage. I knew they had all the overheads. And you were sort of questioning the opaqueness of that whole system. So yeah, it is annoying when somebody just clicks to leave, but it’s their free right to come and go. You know, they might need that money for something else. They might think just you’re not good.
And actually, I think it has driven my investment ethos a lot more. Because you have to change how you talk and think about what you are doing in a way that previously you wouldn’t. So before my portfolio was public and even for a time after that, I didn’t have to justify why I held a position to anybody. Now I might have someone asking why I am doing something or not – then you really have to think things through and ask yourself if it’s the right decision. And so I think the transparency of it all is such a great learning school.
DK: So to finish off, I was looking recently at a presentation by this Danish guy, who I believe is the most popular investor on eToro. I think over more than a decade his annualised returns are close to 25% net of fees. And then he’s done that with a Sharpe ratio that is better than Terry Smith’s. So if we assume that is not just him gaming his returns in some way, he has basically delivered better risk-adjusted returns than arguably the most successful fund manager in the UK of the last 15 years. I look at that and, even as a cynical person, it’s hard to find fault with it. So I’m curious if you are ever in a position where maybe people are snobby about what you are doing and if that’s frustrating, given that you are basically doing as good a job or even better than the ostensible ‘pros’?
Not really. I mean I’ve certainly come up against that. I was recently on some panels with fund managers and there’s definitely something. I don’t know if it’s my age or my sex or the fact that I’m a popular investor or whatever, there’s definitely a bit of a snub. You know, ‘Oh, why are you on the panel? What do you know about capital markets?’
So it is a bit frustrating, but I think that’s a great thing about the internet. It can connect us with our community and our people however fringe or funny or far out or weird they might see. And I don’t think it’s an ‘either or’ – I think there is a place for everyone.
Maybe traditional fund management is not for everyone for X, Y, Z reasons. And maybe copy trading is not for somebody else because of X, Y, Z.
And so, yeah, that’s the thing I love about the internet. It has allowed me to work in a sector where I wouldn’t have otherwise.
