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Updated on Tuesday, June 22, 2021
Spark Investment Management is a small investment firm based out of New York City. The firm does not work with individuals and its only clients are pooled investment vehicles. It provides investment management to these clients using quantitative strategies and advanced trading algorithms in an attempt to generate high returns. If successful, the firm keeps a share of the client’s profits.
The bottom line: Spark Investment Management is a quantitative investment firm that uses advanced mathematical models and technology to try to beat the market.
- Develops unique algorithms and strategies in-house
- Charges high fees based on portfolio performance
- Only works with pooled investment vehicles
|Assets under management: $497,135,711|
|Minimum investment: None listed|
|Individual investor to advisor ratio: N/A (firm does not work with individual investors)|
|Fee structure: A percentage of AUM, performance-based fees|
|Headquarters: 150 East 58th Street, 26th Floor
New York, NY 10155
Phone: (212) 826-3709
All information included in this profile is accurate as of June 15, 2021. For more information, please consult Spark Investment Management’s website.
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Overview of Spark Investment Management
Spark Investment Management began operating in January 2012. Peter Laventhol founded the company and remains the firm’s principal, manager and majority owner through a holding company (Spark Holdings LLC).
Spark Investment Management has 20 employees, of which 10 work in an investment advisory capacity. The team manages a little over $497 million in assets. To develop its sophisticated mathematical strategies, Spark Investment Management built a team with very high-end academic credentials. One-third of its staff holds PhDs. The team also includes math and science gold medal winners and even a Carnegie Hall soloist.
Spark Investment Management’s pros
- Designs unique algorithms and strategies: Spark Investment Management creates investment strategies and research that are not publicly available, so its approach is unique. The firm believes this can help it find hidden opportunities and deliver returns above the market average.
- Fees based on delivering a profit: While many investment firms charge a fee even when portfolios lose money, Spark Investment Management only charges its management fee when it achieves a quarterly profit.
- Impressive investor credentials: Spark Investment Management built a team with high-end credentials to execute its advanced strategies. One-third of its staff has a PhD, and the team also includes science and math gold medal winners.
Spark Investment Management’s cons
- Only available to pooled investment vehicles: Individual investors cannot sign on directly as clients. They must go through a pooled investment vehicle, which then enrolls with Spark Investment Management.
- Very high fees: Spark Investment Management charges 0.50% of client assets every quarter it makes a profit, which is potentially up to 2% per year. In comparison, the average advisor fee is 1.17% per year, according to a 2019 survey from RIA in a Box. Spark Investment Management also charges an annual performance-based fee of 20% or more of a client’s profits for the year.
- Performance-based fees could create conflicts of interest: Since Spark Investment Management only makes money when it earns a profit, it could have an incentive to take on greater risk in an attempt to earn larger returns and profits.
- High risk, high-cost strategies: Spark Investment Management uses high-frequency trading and leverage for its investments. If successful, these strategies can earn high returns but they also increase costs and risk.
- Limited customer interaction: Spark Investment Management does not speak with individual clients directly and only works with the heads of pooled investment vehicles. When we called their office for more information, no one answered.
What types of clients does Spark Investment Management serve?
- Pooled investment vehicles
Spark Investment Management only works with pooled investment vehicles. These are funds that combine the money of multiple different investors to create a large pool of money overseen by a professional management team, like a mutual fund or a hedge fund. The pooled investment vehicle manager could then decide to allocate part of the funds to organizations like Spark Investment Management.
Spark Investment Management does not accept any other type of client. The firm also does not list an account minimum that a pooled investment vehicle must contribute to sign on. Its brochure notes that it currently has three clients, contributing a total of about $497 million, which means the average client size is over $165 million.
Services offered by Spark Investment Management
Spark Investment Management primarily provides portfolio management for its clients. The firm manages funds on a discretionary basis, meaning it has the right to make investment decisions without getting client approval for each trade. Spark Investment Management does not manage funds on a non-discretionary basis where they would need client approval for investments, as this would not fit their high-frequency trading strategies.
As part of its portfolio management services, Spark Investment Management could also offer investment advice to the heads of the pooled investment vehicles. However, Spark Investment Management does not provide advice directly to the individual investors putting money in these vehicles. In addition, the firm does not tailor its investment recommendations based on the needs of the individual investors.
For reference, here is a complete list of Spark Investment Management’s services:
- Investment management (discretionary only, no wrap-fee program)
- Investment advice (only to the pooled investment vehicles, not to individual investors)
How Spark Investment Management invests your money
Spark Investment Management’s investment goal is to deliver returns superior to the market average through advanced technology and quantitative strategies. The firm uses a variety of mathematical methods as part of its portfolio design, such as statistical forecast generation, trend following and mean reversion.
The team also researches and develops brand-new algorithms and trading strategies that aren’t publicly available in an effort to gain an advantage over other investment firms. Spark Investment Management provides advanced technology and software to its researchers to develop these strategies.
Spark Investment Management typically builds portfolios of equities, fixed income investments, derivatives, commodities and credit markets, though it may consider other assets. Its strategies involve high frequency trading. Additionally, it uses leverage, where it borrows money to make larger trades. These are high-risk, higher cost investment strategies that can also earn higher returns if successful.
Fees Spark Investment Management charges for its services
Since Spark Investment Management’s primary goal is to deliver strong investment returns, it bases its fees on its performance. First, it charges a fee based on a percentage of assets under management, ranging up to 0.50% of the client’s assets every quarter. However, the firm will only charge this fee during profitable quarters when a client’s portfolio makes money.
In addition, Spark Investment Management also charges an annual incentive fee worth 20% or more of a client’s total investment gains for the year. While the fees are not negotiable, Spark Investment Management’s brochure notes that it could waive or reduce fees at its discretion.
Besides the performance fees, Spark Investment Management also requires its clients to pay a portion of the investment fees that come up from executing their strategies. This not only includes brokerage costs, but can also include personnel costs, such as employee salaries that come with overseeing a client’s portfolio. The firm details the client’s in its agreement with a client.
Spark Investment Management disciplinary disclosures
Spark Investment Management does not have legal or disciplinary events to report. If a registered investment advisor has any past disciplinary issues, including criminal charges, regulatory infractions and civil actions taken against the firm or its representatives within the last 10 years, they need to report it on their official brochure and their Form ADV filing.
For more information, visit Spark Investment Management’s IAPD page.
Spark Investment Management onboarding process
Spark Investment Management does not onboard individual clients directly as it only works with pooled investment vehicles. You need to sign on with a pooled investment vehicle first and then the manager should contact Spark Investment Management to discuss contributing part of their fund with them. Spark Investment Management will review the pooled investment vehicle’s investment objectives, strategies and restrictions to design suitable portfolio recommendations.
Your communication would be with the pooled investment vehicle though, not with Spark Investment Management. Spark Investment Management does not publicly share which pooled investment vehicles it currently works with. If you are part of a pooled investment vehicle, you could ask your fund manager to inquire with Spark Investment Management about the process to join.
Where Spark Investment Management is located
Spark Investment Management’s only location is in New York City.
Is Spark Investment Management right for you?
If you are a sophisticated investor whose top goal is to earn a return that beats the market, Spark Investment Management could be a fit. Its investment team’s credentials, strategies and technology are all very advanced, and the firm only earns a management fee when it delivers a profit to its clients.
The main challenge with using Spark Investment Management is accessing its services in the first place. You either need to be the head of a pooled investment vehicle or an investor in a pooled investment vehicle that then signs on with Spark Investment Management. The firm’s market is very limited as it currently only has three clients. If you’d like an alternative, consider using this financial advisor tool to find another firm that can help you manage your investment portfolio but also makes it easier to onboard as a new client.
The “Find a Financial Advisor” links contained in this article will direct you to webpages devoted to MagnifyMoney Advisor (“MMA”). After completing a brief questionnaire, you will be matched with certain financial advisers who participate in MMA’s referral program, which may or may not include the investment advisers discussed.