Frequently Asked Questions
Does the BFAI Model also work with other Indices?
In December 2024, we tested the model with the NASDAQ 100 without changing any of the initialization settings. It outperformed the index on average by 2.6% over the 2008-2015 period and by 2.3% over 2015-2023.
The higher concentration and smaller overall size of the NASDAQ 100 makes it harder for the model to outperform. We are currently not planning to offer the model for indices other than the S&P 500.
Why isn't this structured as a fund?
First, the administrative and audit cost of a fund would be higher and the goal is to offer a product with costs comparable to an ETF. Second, the tax preparation can be complex depending on the jurisdictions of fund investors, third, the model is suitable for managed accounts, and fourth, managed accounts require less trust from investors as they keep full control over their managed accounts.
Has the model been tested in the real world?
Since Oct 20, 2023, the model has been managing real money accounts.
Are there any hidden costs?
The managed account is charged with a 0.75% annual management fee. There are no other fees charged by Shire Capital. There are no administrator or audit fees. The account pays commissions on trades, wire transfer fees, etc. as if the trades were made by the account owner. Shire Capital doesn't earn any portion of any commissions or other fees charged by IB. The index position is held via the SPY ETF, which charges an annual management fee of 0.0945%.
Is there a minimum investment amount?
The account should have at least USD 100,000 as the position size of overweight positions would otherwise become too imprecise.
Is there a minimum investment duration?
No.
Once my account is linked, how much control do I still have?
You still have full control except for entering orders to trade. Upon request, we change this default setting and allow account owners also to trade, so that they can liquidate and close the account any time they want. Without the trading permission, the account would first have to be delinked by the account owner, before he/she could trade again. Any trades or orders that the BFAI model executes can be seen in realtime in the managed account by the account owner.
Can accounts at other brokers be managed?
Currently not. Interactive Broker's (IB) technology and low commissions are best suited for the BFAI model.
What's the tax treatment of the managed account?
The execution of trades in the managed account by the BFAI model does not alter the tax status of the account. It is taxed like any other personal account. When opening an account, IB requests information about the owner's tax jurisdiction to, among other things, apply the correct withholding tax on dividends, potentially at reduced tax treaty rates. Shire Capital does not provide tax advice or prepare any tax information. The account owner will receive (or request) such information from IB.
Are trades by the AI software fully automated?
After analyzing new data, the software provides recommendations and prepares orders. Each order is manually reviewed before submission to prevent erroneous trades.
Will there be regular communication or reporting to managed account owners?
IB provides performance reports, tax information, and statements that can be customized and automatically delivered via email. Shire Capital may occasionally provide additional analysis regarding the model, but does not intend to issue regular reports or communication.
