Kernel has selected challenger online broker, Alpaca, to back its just-released US share-trading service launched to existing investors in the manager’s products last week.
The win is likely a NZ-first for the US-domiciled Alpaca, which raised US$52 million at the end of April in a ‘series-C’ investor round.
Founded by Hitoshi Harada and Yoshi Yokokawa in 2015, Alpaca changed tack from a financial database provider to online brokerage in 2018 to now claim more than 5 million account-holders through 200 business clients across 40 countries.
And the Alpaca appointment also marks the Kernel trading platform out from rivals named in its launch release, Sharesies and the FNZ-owned Hatch, that both use the same US-based provider, DriveWealth, to broker US equities and exchange-traded funds (ETFs).
Yokokawa, however, named Interactive Brokers – used by BlackBull Markets in NZ – as its main competitor in an interview with US specialist publication, TechCrunch.
Dean Anderson, Kernel chief, said the new service, which has been in beta mode for several months with a trial audience, is only open to clients who use any of the firm’s other products… for now.
“We’ll have a public launch later,” Anderson said.
In the interim, too, the trading platform is limited to the US market – albeit giving investors access to the top 500 US listed companies (as defined by the S&P 500 index) and a choice of 300 ETFs from Vanguard, iShares (BlackRock) and Invesco.
The ETF range covers “every strategy you could think of”, he said, expanding beyond the largely index-tracking in-house Kernel funds.
Anderson said the investment menu “will likely” expand over time.
But Kernel had no plans to provide whole-of-market securities-trading with the new service primarily aimed at allowing investors to consolidate fund and direct equities holdings in a single platform.
“Many of our investors have a core portfolio of funds but also own some US shares,” he said, citing client demand to bring their holdings under the same administrative umbrella.
“We’re not trying to encourage day-trading,” Anderson said, “but to provide a simple and transparent platform for consistent, ambitious investors.”
Many Kernel investors had already shifted direct US holdings across to the new service in the first 24 hours since the doors opened, he said.
The trading platform levies a flat 0.4 per cent foreign exchange charge on every transaction, split with Alpaca, but no other fees. Furthermore, all holdings and fees are priced in NZ currency.
Anderson and co-founder, Stephen Upton, both left the NZX-owned ETF operator, Smartshares (now Smart), ahead of launching the ‘digital-first’ Kernel in 2019 as a low-cost index fund manager.
The firm now manages more than $1.8 billion across its suite of funds, savings products and KiwiSaver scheme (holding some $440 million as at the end of March).
While the company had diversified beyond its index fund beginnings, Anderson said Kernel was, at heart, a “data and technology” company.
The San Mateo-headquartered Alpaca echoes the sentiment in its origin story, noting it has been “and will always be a technology company” that happens to play in financial services.
According to the group’s website, the brand name was inspired after the founders – during a search for “either animal or fruit-based names” – spied a herd of alpacas mooching around in a field beside the under-construction US$100 million home of Softbank head, Masayoshi Son, one of the world’s richest men.
Harada and Yokokawa “felt that alpacas symbolize success, considering many wealthy owners choose to have them as pets in California”, the website says.