Legal disclosures

General information

This website is for informational purposes only. See important Terms of Use and Privacy Policy.

Covestor Limited doing business as Interactive Brokers Asset Management (referred to as “IBKRAM”) is an investment adviser registered with the Securities and Exchange Commission (“SEC”) under the Investment Advisers Act of 1940. Registration with the SEC does not imply any level of skill or training. Additional information about our firm can be found in the Informational Brochure, our other documents and disclosures on the Forms and Agreements page of our website, and on the SEC’s website at: Adviser Information

IBKRAM’s advisory services are only provided to investors who become clients pursuant to a written Investment Management Agreement (available on the Forms and Agreements page), which both potential and existing clients are urged to read carefully and consider in determining whether such an agreement is suitable for their individual facts and circumstances.

IBKRAM allows clients to choose suitable investments based on a risk scoring methodology. IBKRAM makes the same trades in portfolios and client accounts simultaneously and automatically. Clients may invest in IBKRAM portfolios directly or through their existing wealth manager or investment adviser. IBKRAM is a part of the Interactive Brokers Group, and all brokerage transactions in IBKRAM client accounts are made through Interactive Brokers LLC, an IBKRAM affiliate, which is a conflict of interest.

IBKRAM does not provide personalized financial planning to clients, such as estate, tax or retirement planning. Nothing on this site should be construed as a solicitation or offer, or recommendation, to buy or sell any security.

PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS, AND ANY EXPECTED RETURNS OR HYPOTHETICAL RESULTS MAY NOT REFLECT ACTUAL FUTURE PERFORMANCE. FURTHERMORE, PAST RETURNS MAY REFLECT THE PERFORMANCE OF ASSETS FOR A FINITE TIME, OR DURING A PERIOD OF EXTREME MARKET ACTIVITY. ALL INVESTMENTS INVOLVE RISK AND MAY LOSE MONEY.

There can be no assurance that an investment in one or more IBKRAM portfolio or any actual performance shown on the IBKRAM website will lead to the same results in the future or perform in any predictable manner. It should not be assumed that investors will experience returns in the future, if any, comparable to those shown or that all of IBKRAM’s clients experienced such returns.

While IBKRAM does provide investment advice to its clients, the information on the IBKRAM website and this web page is provided as general and impersonalized investment information and is not a recommendation or solicitation to buy or sell any security. IBKRAM does not guarantee or certify the quality, accuracy, completeness, or timeliness of any content contained on the IBKRAM website. Please obtain additional appropriate professional advice as needed in making any investment decisions.

Financial Market Data powered by Trading View. All rights reserved. View the Terms of Use.

System response and account access times may vary due to a variety of factors, including trading volumes, market conditions, system performance, among others.

Investments and Clients

Portfolios available for investment on the IBKRAM platform may not be suitable for all investors. Investors may lose all or part of their investments in any IBKRAM portfolios. Past performance is no guarantee of future results. IBKRAM uses its best judgment and good faith efforts in rendering services to clients, but it cannot warrant or guarantee any particular level of account performance, or that any account will be profitable over time. Not every investment decision or recommendation made by IBKRAM will be profitable. IBKRAM clients assume all market risk involved in the investment of account assets under the Investment Management Agreement and understand that investment decisions made by IBKRAM in their accounts are subject to various market, currency, economic, political and business risks.

IBKRAM only allows you to invest in a portfolio it offers if it is suitable for you in light of your financial situation and investment objectives that you have described to IBKRAM in response to our risk questionnaire.

IBKRAM clients should keep IBKRAM informed of any changes in their financial situation or investment objectives and should periodically review and update their answers to IBKRAM’s risk questionnaire and the list of securities they specified should not be traded in their IBKRAM account. IBKRAM will periodically prompt clients to review the answers to its risk questionnaire and the list of securities they specified should not be traded in their IBKRAM account.

Portfolios and Portfolio Managers

All Portfolio Manager information including personal data, profiles, strategies, monthly investment reports, and historical results outside of IBKRAM has been provided by the Portfolio Managers. IBKRAM makes no representation or warranty as to its accuracy, completeness or relevance. This information does not represent the opinions of IBKRAM.

Performance returns

Past performance is no guarantee of future results.

Periodic and since inception performance returns for managers and portfolios are calculated daily and presented net of simulated advisory fees and actual brokerage commissions.

Monthly vs. S&P 500 return and the corresponding chart is calculated to the most recent month-end date. For client accounts, periodic and since inception performance returns are updated continuously throughout the day, with up to a 15-minute delay on pricing.

Performance of client accounts is calculated by IBKRAM daily on a time-weighted basis including cash, dividends paid, earnings distributions, and reflects the deduction of IBKRAM advisory fees, brokerage and other commissions and expenses actually paid by clients.

The performance charts are provided for informational purposes only, and should not be used as the basis for making an investment decision. We rely on mathematical formulas, computer programs, and pricing information from third-party vendors to provide these returns. Neither IBKRAM nor any of its data or content providers shall be liable for any errors in this information or any actions taken by you in reliance upon this information.

Manager return

Performance of the Portfolio Manager’s account is calculated by IBKRAM on a daily time-weighted basis, including cash, dividends and earnings distributions and reflects the deduction of brokerage commissions. Manager returns include trades and positions that fail IBKRAM’s trading rules, as a result, actual client returns will differ. IBKRAM advisory fees are simulated and applied retroactively to present the portfolio return net-of-fees.

Historical Portfolio Manager returns with inception dates prior to launch on IBKRAM include trading history and positions data provided by the manager. IBKRAM has reviewed this data and confirmed it is consistent with current portfolio strategy.

Benchmark returns

Comparisons to benchmarks or indices are provided for illustrative purposes only. An index is a broadly diversified, unmanaged group of securities, which may include only large capitalization companies or companies of a certain size. Broadly based indices may be shown only as an indication of the general performance of the financial markets during the periods indicated. The S&P 500 Index is intended for comparison to general equity market behavior only and may not be suitable for comparison to individual portfolios with specific objectives, such as industry or security types.

Because of the differences between portfolio and client investments and any indices shown, IBKRAM cautions investors that no index is directly comparable to the performance shown since each index has its own unique results and volatility, and such indices, if shown, should not be relied upon as an accurate comparison. Index comparisons are provided for informational purposes only and should not be used as the basis for making investment decisions. There are significant differences between client accounts and the indices referenced including, but not limited to, risk profile, liquidity, volatility and asset composition. If you would like more specific information about a particular index, please visit the respective index’s website.

Benchmarks relevant to each portfolio are assigned by IBKRAM based on overall strategy, portfolio trade history, and/or other criteria.

For certain portfolios, IBKRAM uses an index as a benchmark, while for others it uses an investable exchange-traded fund (“ETF”) as a benchmark.

Index returns do not reflect the deduction of any management fees, transaction costs or expenses. Individuals cannot invest directly in an index. Investable ETF returns reflect the deduction of (i.e., are net of) management fees, transaction costs and expenses.

Benchmark returns displayed on the individual portfolio profile pages have been calculated by IBKRAM using daily benchmark prices and include capital appreciation but do not include dividend income. By contrast, returns for the portfolio manager account associated with each portfolio include dividend income.  This difference could result in benchmark returns being understated.

IBKRAM-managed Smart Beta portfolios

In addition to Portfolio Manager strategies, IBKRAM allows its clients to invest in certain portfolios (referred to as the Smart Beta Portfolios) that IBKRAM itself manages. Because IBKRAM staff have constructed and manage the Smart Beta portfolios without any involvement on the part of third-party Portfolio Managers, IBKRAM retains the entire 0.08% fee charged to its clients for investments in the Smart Beta portfolios and does not pay any portion of this fee to any Portfolio Managers.

These portfolios are proprietary investment portfolios designed and managed by IBKRAM itself, and not by third-party Portfolio Managers. To manage these portfolios, IBKRAM trades some of its own capital in separate proprietary brokerage accounts associated with each Smart Beta portfolio and then mirrors this trading in the accounts of clients investing in that specific portfolio. Subsequently, any quarterly rebalancing trades placed by IBKRAM in the Smart Beta portfolios are proportionally replicated in client accounts investing in one or more of these portfolios via IBKRAM’s co-trading technology.

Please note that, due to the large number of positions included in each Smart Beta portfolio, the initial investment and the quarterly rebalancings will result in numerous transactions in an investing client’s account. This portfolio turnover will lead to transaction costs, such as commissions payable to Interactive Brokers LLC (IBKRAM’s affiliated broker-dealer) whenever IBKRAM buys and sells securities in the Smart Beta portfolios, which is a conflict of interest.

The Smart Beta portfolios involve a large number of stocks and there will be trades in many of these stocks whenever IBKRAM rebalances the portfolios or clients add to or redeem their investments in these portfolios. You will need to report some (or all) of these trades on your tax forms. IBKRAM cannot provide tax advice or prepare tax documents for you. Please consult an accountant or tax attorney to determine the tax-related obligations associated with investing in these portfolios. Please note that Interactive Brokers LLC provides certain tools to assist you with your tax filings, but these tools may only be able to support a limited number of trades.

IBKRAM only allows you to invest in a Smart Beta portfolio if it is suitable for you in light of your financial situation and investment objectives that you have described to IBKRAM in response to our risk questionnaire. In determining the risk score of clients investing in an IBKRAM-managed portfolio through their existing investment adviser, IBKRAM will take into account whether the client’s existing adviser is registered with the SEC or a state regulator and has confirmed that it will only invest its clients in portfolios suitable for the client based on the client’s investment profile and the adviser’s dealings with the client.

Each Smart Beta portfolio seeks, as its investment objective, to achieve total returns that exceed the total returns of certain market capitalization-weighted indices, such as the S&P 500, by relying on systematic rules-based investment strategies that do not use conventional market capitalization weights. IBKRAM’s Smart Beta portfolios are designed to provide systematic exposure to a fundamental factor or a combination of factors, such as value, growth, quality, and dividend yield. Using a proprietary automated, computer algorithm, IBKRAM selects the equity securities that comprise the Smart Beta portfolios, and, initially and upon quarterly rebalancing, determines the allocations and sector weights of the securities in the Smart Beta portfolios. IBKRAM’s Investment Management team oversees the trading in the Smart Beta portfolios in order to verify the accuracy and reliability of the stock fundamental data used in the model. IBKRAM’s main sources of information for the transactions in the Smart Beta Portfolios include data about US stocks provided by third-party data vendors.

These portfolios mainly invest in stocks and may not be suitable for all investors. You may lose all or part of investments in these portfolios. Past performance is no guarantee of future results. You may find additional information on the risks, conflicts of interest, applicable fees and brokerage commissions, brokerage arrangements, fractional shares, and limitations on investments and divestments associated with these portfolios (along with IBKRAM’s full disclosures) on the Forms and Agreements page, which clients must acknowledge before investing.

Trade replication and adjustment trades

IBKRAM manages client accounts by replicating portfolio trades in the accounts of clients investing in each portfolio. Clients choose the specific portfolios and may block specific investments from being made in their accounts, but IBKRAM is responsible for all trading in client accounts. While IBKRAM aims to replicate portfolio trading activity as closely as possible in client accounts, it cannot guarantee it will succeed in doing so or that it will achieve the same performance as the underlying portfolio. This is due to a number of factors, including but not limited to:

  • restrictions clients place on the trading in their account,
  • any delay in receipt of portfolio trading data,
  • rounding differences resulting from differing levels of assets in clients’ accounts invested in a portfolio and the account underlying the portfolio,
  • IBKRAM’s discretionary decisions stemming from trade replication rules,
  • any changes IBKRAM may make to the way it replicates portfolio trades in client accounts, and
  • any corporate actions affecting the stocks the specific portfolio invests in.

To ensure that IBKRAM is able to better track the trading activity in the portfolios, clients authorize IBKRAM to make adjustment trades in their accounts. These adjustments may require small buy or sell trades in client accounts for which clients will incur additional commissions.

Hypothetical back-tested results

IBKRAM provides back-tested hypothetical results for the Smart Beta portfolios for informational and educational purposes only. These hypothetical back-tested results are NOT actual results based on actual trading of real client funds, are not based on nor bear any relation to the actual performance of any IBKRAM client account, and were achieved by means of the retroactive application of a model designed with the benefit of hindsight. IBKRAM does not make any representation that any client will or is likely to achieve results similar to the hypothetical results presented.

Actual results in an IBKRAM client account employing the same strategy could differ significantly from these back-tested hypothetical results depending on factors such as: broad stock market performance, factor returns, available liquidity, interest rates, economic growth, transaction costs, and other market factors. One of the limitations of hypothetical back-tested results is that they are generally prepared with the benefit of hindsight. Additionally, unlike actual trading, hypothetical trading does not involve financial risk and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading strategy in spite of trading losses are material factors which can adversely affect actual trading results. There are numerous other factors related to the markets in general or the implementation of a particular trading strategy which cannot be fully accounted for in the preparation of hypothetical performance results, all of which can adversely affect actual trading results.

Please note an important distinction between the methods IBKRAM used to calculate hypothetical and actual returns: while hypothetical back-tested returns are calculated on a month-end basis with this monthly series of hypothetical returns then used as basis for calculating the various risk and return metrics presented, actual returns are calculated daily, as for all the other portfolios on the IBKRAM platform.

Consequently, the month-end calculation of hypothetical back-tested results may limit their comparability to the daily calculation of actual returns.

Hypothetical back-tested results and related risk metrics are calculated and presented separately from performance and risk metrics based on trading of actual funds.

All hypothetical back-tested results presented reflect the deduction of advisory fees, brokerage or other commissions and other expenses that an IBKRAM client would have to pay if he invested in a portfolio after the launch date.

While IBKRAM believes that the data used to calculate the hypothetical results was obtained from reliable sources, in generating the hypothetical charts and results, IBKRAM used historical market data which has not been audited and validated, and may contain errors in pricing or other conditions. IBKRAM exclusively relied on data compiled by a third-party (i.e., the Thomson Reuters Worldscope database) for market data and information as the basis for these hypothetical return calculations, and cannot be responsible for the accuracy of this data.

You may review more detailed disclosures on the limitations of hypothetical returns and the way IBKRAM calculated these in the Hypothetical Back-Tested Results Disclosure on the Forms and Agreements page, which clients must review before being able to view hypothetical results.

Advisory fees

Fees may vary for each client based on the portfolios selected for investment. Advisory fees are calculated based upon the amount of assets being managed by IBKRAM (as detailed in IBKRAM’s Informational Brochure, Form ADV Part 2).

IBKRAM charges clients an annual management fee ranging between 0.08% and 1.5% of the gross market value of client assets invested. An additional performance fee ranging between 2-12% of positive performance may be applied to qualified clients investing in certain portfolios. IBKRAM uses an online Qualified Client affirmation process to assess whether a specific client is a qualified client under the applicable SEC rule. The fees applicable to investments in each portfolio are set forth on each portfolio page at ibkram.com. IBKRAM does not charge clients fees on assets not invested in a portfolio.

IBKRAM’s fees only cover its investment advisory services and do not include brokerage commissions, custodial fees, transaction fees, exchange fees or other related costs and expenses incurred for the investment of client assets through IBKRAM. All fees paid to IBKRAM for its investment advisory services are separate, distinct and in addition to any fees and expenses charged by mutual funds or in conjunction with internal expenses associated with exchange-traded funds. Clients will be solely responsible, directly or indirectly, for these additional expenses. IBKRAM does not receive any portion of these commissions, fees, or costs.

Investment minimum

The investment minimum is the minimum dollar amount required to invest in a particular portfolio. The minimum amount is determined by IBKRAM, based on the characteristics of the underlying portfolio. IBKRAM investment minimums start at $5,000 for IBKRAM-managed Smart Beta portfolios and $10,000 for portfolios managed by third-party Portfolio Managers. Investment minimums should not be considered specific investment advice for your investment situation.

Brokerage arrangement and applicable commissions

Pursuant to the Investment Management Agreement between IBKRAM and its clients, all brokerage transactions occur through Interactive Brokers LLC, an affiliate of IBKRAM. IBKRAM does not offer services through any other broker-dealer. The use of an affiliate for brokerage services represents a conflict of interest. IBKRAM clients acknowledge this conflict of interest and authorize IBKRAM to execute transactions through Interactive Brokers LLC when they open an IBKRAM account. Clients should consider the commissions and other expenses, execution, clearance, and settlement capabilities of Interactive Brokers LLC as a factor in their decision to invest in an IBKRAM Portfolio. IBKRAM believes it can meet its best execution obligation by trading its clients’ trades through Interactive Brokers LLC. While there can be no assurance that it will in fact achieve best execution, IBKRAM does periodically monitor the execution quality of transactions to ensure that clients receive the best overall trade execution pursuant to regulatory requirements.

Interactive Brokers LLC charges IBKRAM clients commissions based on IB’s tiered commissions structure for stock trades and IB’s standard options commissions structure for options trades.

Generally, for transactions in stock portfolios managed by third-party managers, Interactive Brokers LLC charges IBKRAM clients commissions of $0.0035 per share, with exchange, regulatory and clearing fees charged separately. (This is subject to a minimum per order commission of $0.35 and a maximum of 0.5% of the value of the trade.) For transactions in options portfolios managed by third-party managers, Interactive Brokers LLC charges IBKRAM clients commissions as specified in the standard options pricing structure for North America set forth on IB’s website.

For transactions in Smart Beta Portfolios, which are managed by IBKRAM, Interactive Brokers LLC offers IBKRAM clients a modified tiered commission structure. Under this structure, Interactive Brokers LLC charges $0.0035 in commissions per aggregated shares based on the whole “basket” of securities in a client’s Smart Beta investment rather than on each security. Generally, for Smart Beta Portfolio trades, Interactive Brokers LLC charges a minimum commission equal to the lower of $5 or 0.05% of trade value per client account, if more than the standard tiered commissions charge of $0.0035 per aggregated shares in the client basket. Interactive Brokers LLC caps commissions on Smart Beta portfolios at 0.5% of the value of the basket trade.

Additionally, Interactive Brokers LLC requires certain types of brokerage accounts to generate a minimum level of commissions each month. Under certain circumstances, Interactive Brokers LLC will charge IBKRAM clients a minimum monthly commission charge of up to $10. Specifically, whenever the overall monthly commissions paid by all IBKRAM client accounts do not amount to at least $10 in commissions per account per month, Interactive Brokers LLC will collectively charge IBKRAM clients the difference between the actual commissions charged and the overall $10 minimum due for all IBKRAM clients, determined on a pro rata basis (based on the amount by which each IBKRAM client account is below the $10 minimum.)

You may find information on the commissions applicable to your Interactive Brokers LLC brokerage account, including your IBKRAM investments, on the Interactive Brokers website here: Stocks, ETFs (ETPs) and Warrants - Tiered Pricing Structure and Options - North America Pricing Structure

No self-directed trading

IBKRAM offers a discretionary investment advisory program and not a self-directed brokerage service. IBKRAM clients do not enter individual buy and sell orders for specific securities to be executed at particular times. IBKRAM places buy and sell orders for specific securities consistent with the Portfolio Manager or IBKRAM-managed Smart Beta Portfolio strategy selected by clients, in accordance with the discretionary authority granted IBKRAM by clients. If a client wants to control the specific time and securities to be bought and sold in his account, he should not use IBKRAM or should execute separate self-directed trades in a portion of their Interactive Brokers LLC brokerage account or another brokerage account.

Nonetheless, IBKRAM clients may restrict the stocks traded in their account at any time and IBKRAM will honor these restrictions when mirroring the trading in portfolio clients choose to invest in. Clients should understand that imposing restrictions on future investments and selling any existing holdings in a portfolio may negatively affect the performance of a client account and lead to that account performing differently or worse than the portfolio it follows.

Trial accounts

30-day trial accounts simulate the investment of funds to IBKRAM portfolios through the allocation of virtual dollars. Trial accounts are for demonstration purposes only. The activity in a trial account does not represent the actual results an IBKRAM client could achieve in a live IBKRAM account. Actual results in a live IBKRAM client account will vary.

Trial account valuations are calculated based on the allocated investment amounts and the daily returns for the manager account associated with each designated portfolio. Trial accounts do not track individual holdings, transactions, or daily individual security pricing. These estimated account valuations are for demonstration purposes only. Actual results in a client account will thus be different than represented in the trial account. Additional information on the differences between a trial account and a live IBKRAM client account can be found here.

IBKRAM management fees are not charged on trial accounts and are shown as a deduction from the account balance for illustrative purposes only. Management fees range between 0.08%-1.5% per year for investment in a portfolio. Before investing in a portfolio, you will be advised of the specific management fee (which is displayed on all portfolio profile pages). No management fees are charged for any cash in your account that is not invested in an IBKRAM portfolio.

Trial account valuations are calculated using the returns of the manager account associated with the specific portfolio, and reflect the deduction of actual brokerage fees incurred and a simulated IBKRAM advisory fee that would be charged to an actual IBKRAM client account. The impact of these expenses may be understated or overstated.

Monthly gain / loss

Gain/loss: Ending valuation - (Beginning valuation + Cashflows)

Monthly simple return

Simple return: Gain or loss / (Beginning valuation + Cashflows)

Options disclosure

Certain manager portfolios on the IBKRAM platform may include options trading. Options trading involves a high degree of risk, is highly speculative, and is not suitable for all investors.

IBKRAM clients should review this disclosure, the Enable Options Strategies disclosure on the Forms and Agreements page, and the disclosure of the risks of trading options included in IBKRAM’s Informational Brochure before deciding to invest in portfolios trading options.

Please note that your brokerage account must be enabled for options trading to invest in options through your IBKRAM account.

IBKRAM clients contemplating options trading should carefully review and understand the Options Clearing Corporation’s ("OCC") disclosure document "Characteristics and Risks of Standardized Options" and Interactive Brokers LLC’s "OCC Risk Disclosure Statement and Acknowledgements."

Trading options may result in the total loss of premiums and transaction costs. Option contracts are traded for a specified period of time and have no value after expiration. Trading halts in the underlying security, or other trading conditions (e.g., volatility, liquidity, system failures) may cause the trading market for one or all options to be unavailable, in which case, the holder or writer of an option would not be able to engage in a closing transaction, and would remain obligated until expiration or assignment. Even if the market is available, there may be situations when options prices will not maintain their customary or anticipated relationships to the prices of the underlying and related interests.

Uncovered option trading is the most speculative and riskiest form of trading and exposes investors to potentially significant losses. Uncovered options writing is suitable only for knowledgeable investors who fully understand the risks, have the financial capacity and willingness to incur potentially substantial losses, and have sufficient liquid assets to meet applicable margin requirements.

IBKRAM will attempt to mirror the options trading in the portfolio(s) in which you invest but may not be able to perfectly replicate the same proportion of options in your account that the Portfolio Manager holds in his account. Therefore, the performance of your account may be significantly different or worse than that of the Portfolio Manager’s account (referred herein as “performance drift”) for several reasons, including but not limited to the following:

  • Integer replication: Since options do not trade in fractions of contracts, IBKRAM must either buy more or less options and underlying stock than exact replication requires. As options are leveraged instruments and options positions often have associated stock positions, this options investment imbalance between your account and that of the Portfolio Manager could result in your account having significantly different performance, leverage, levels of risk and trading costs than the portfolio you invest in.
  • Illiquidity: The liquidity of options contracts in a portfolio varies from one day to the next. Depending on when you choose to invest in an options portfolio, certain contracts may or may not be easily traded. This may result in your account having different performance, leverage, levels of risk and trading costs than the Portfolio Manager account you follow.
  • Frequent cash flows: High frequency of redemptions from options investments may result in your account having proportionally more or less options and associated stock positions than that of the Portfolio Manager, as certain positions are liquidated or additional margin is utilized in order to generate cash for redemptions. Performance drift will also result from frequent cash additions to the options investments in your account.

In order to minimize performance drift between your account and the account of the Portfolio Manager, IBKRAM may recommend that you invest a multiple of the required investment minimum and minimize frequency of redemptions from any options portfolios you invest in.

If you are uncomfortable with the level of risk associated with options trading, you should not invest in portfolios that trade options and should contact IBKRAM at 1.866.825.3005 to let us know.

Short selling disclosure

Certain portfolios on the IBKRAM platform may sell securities short. Short selling refers to the sale of a security that the seller does not own or a sale consummated by the delivery of a stock borrowed by or for the account of the seller. A short selling strategy hinges on the short seller’s ability to purchase later at a lower price the security he sells without initially owning, and attempts to profit from falling security prices of potentially overvalued stocks.

Short selling is more complex than simply owning securities, involves a high degree of risk, is highly speculative, and is not suitable for all investors. The risk of loss associated with short selling is virtually unlimited. Unlike with stock purchases (where the risk of loss is limited to the amount paid for the stock and the gains are potentially limitless), short selling theoretically carries virtually unlimited risk of loss because there is no limit on the price that a security could reach before the short position is closed. Short selling may also involve additional expenses and risks, including hard-to-borrow stock charges and buy-in risk.

If you are uncomfortable with the level of risk associated with selling securities short, you should not invest in short sell securities and should contact IBKRAM at 1.866.825.3005 to let us know.

Use of margin disclosure

Certain portfolios on the IBKRAM platform may trade on margin. Margin refers to the use of borrowed funds to fund the investments in an account. Trading on margin involves a high degree of risk, is highly speculative, and is not suitable for all investors. IBKRAM clients should review this important disclosure before deciding to invest in portfolios trading on margin.

Please note that your brokerage account must be enabled for margin trading to invest borrowed funds through your IBKRAM account.

Trading on margin makes the value of an investor’s account increase or decrease at a greater rate than if no funds were borrowed. The higher the amount of margin (or leverage) in a portfolio, the larger both the risk of loss and possibility of profit. In addition, you must pay the broker interest on your margin loan and may need to pay other fees and expenses as well, such as hard-to-borrow fees and buy-in costs. These additional costs may even lead to a lower rate of return than if funds were not borrowed.

Generally, investment strategies involving margin trading are more speculative and carry a greater potential for loss than investments not using margin.

If you are uncomfortable with the level of risk associated with trading on margin in your account, you should not invest in portfolios using margin and should contact IBKRAM at 1.866.825.3005 to let us know.

Compensation of Portfolio Managers

Portfolio Managers are compensated for licensing their investment data to IBKRAM. IBKRAM compensates Portfolio Managers with a portion of the management fee it charges clients (equivalent to a percentage of the gross market value of client assets managed in that portfolio) investing in their portfolio and, if applicable, a portion of the performance fee it charges any qualified clients. Additional information can be found here.

Reliance on Information Provided by Clients and the Scope of the Risk Questionnaire

IBKRAM only allows you to invest in a portfolio it offers if it is suitable for you in light of your financial situation and investment objectives that you have described to IBKRAM in response to our risk questionnaire. In determining the risk score of clients investing in an IBKRAM-managed portfolio through their existing investment adviser, IBKRAM will take into account whether the client’s existing adviser is registered with the SEC or a state regulator and has confirmed that it will only invest its clients in portfolios suitable for the client based on the client’s investment profile and the adviser’s dealings with the client. Therefore, the investment advice IBKRAM provides to clients is highly dependent on the accuracy of the information provided to IBKRAM by its clients. If a client provides inaccurate information or fails to update outdated information, the quality and relevance of IBKRAM’s investment advice could be materially affected. IBKRAM’s investment advice is limited in scope to the risk questionnaire it asks clients through its website and the answers and information clients provide to IBKRAM. There may be additional information or financial circumstances not asked about in IBKRAM’s risk questionnaire that could inform IBKRAM’s investment advice. Clients should contact another financial advisor to discuss any such additional information or other financial circumstances that clients may think could be relevant to IBKRAM’s investment advice.

Reliance on Third-Party Data

IBKRAM’s investment advice relies on data and information from third party sources. While IBKRAM believes that the data it uses in its investment management processes is obtained from reliable sources, it did not audit or validate this data, which may contain errors. IBKRAM exclusively relied on data compiled by a third-party (i.e., the Thomson Reuters Worldscope database) for market data and information as the basis for the hypothetical return calculations for the Smart Beta Portfolios, and cannot be responsible for the accuracy of this data.

Reliance on Technology

IBKRAM’s investment activities depend on various computer and telecommunications technologies, some provided by or dependent upon third parties, such as data feed, data center, telecommunications or utility providers. IBKRAM’s services to its clients could be severely compromised by system and/or telecommunications failures, power loss, unauthorized system access or use, computer viruses, fire or water damage, human errors in using certain systems, or other events or circumstances. Events that may interrupt computer or telecommunications systems could have a material adverse effect on IBKRAM clients, including by preventing IBKRAM from trading, liquidating or monitoring its clients’ investments. IBKRAM maintains back-up electronic books and records at a third-party disaster recovery site. In case of interruption of its computer and/or telecommunications systems, IBKRAM will strive to resume service to its clients promptly, barring any circumstances outside of its control.

Tax disclosures

IBKRAM does not provide tax advice and does not represent in any manner that investments in an IBKRAM portfolio will result in any particular tax consequences.

Clients should confer with their personal tax advisors regarding the tax consequences of investing in an IBKRAM portfolio, based on their particular circumstances. Clients and their personal tax advisors are responsible for how the transactions conducted in an account are reported to the IRS or any other taxing authority on the client’s personal tax returns. IBKRAM assumes no responsibility for the tax consequences to any client of any transaction.

The Smart Beta portfolios involve a large number of stocks and there will be trades in many of these stocks whenever IBKRAM rebalances the portfolios or clients add to their investment. Clients may need to report some (or all) of these trades on their tax forms. IBKRAM cannot provide tax advice or prepare tax documents for clients. Clients should consult their accountant or tax attorney to determine the tax-related obligations associated with investments in these portfolios. Please note that Interactive Brokers LLC provides certain tools to assist its brokerage clients, including IBKRAM clients, with their tax filings, but these tools may only be able to support a limited number of trades.

Tax consequences of investing in TAXCOV™

The tax consequences of investing in TAXCOV™ are complex, uncertain and may be challenged by the Internal Revenue Service. Additionally, a client’s ability to reduce a tax liability through investments in this portfolio depends on the client's tax and investment profile, including: (a) purchases and sales in investments of the client or the client’s spouse at IBKRAM, Interactive Brokers or elsewhere; (b) type of investment (taxable versus nontaxable); (c) holding period (short versus long); (d) the client’s tax rate; (e) account size; and (f) the amount of capital gains and income a client has against which the client can apply losses harvested in this portfolio. For instance, clients in certain tax brackets may not owe capital gain taxes and certain tax-favored accounts (e.g., Roth and traditional IRAs) do not benefit from tax-loss harvesting as they are already tax-free or tax-deferred. Also, a tax-loss harvesting strategy may not benefit short-term investors. Transactions in another IBKRAM portfolio or outside of IBKRAM may affect whether a loss experienced in this portfolio is successfully harvested and, if so, whether that loss is usable by the client in the most efficient manner. IBKRAM clients could write off harvested losses in their TAXCOV™ portfolio investments against capital gains generated in this same portfolio, other IBKRAM portfolios, other Interactive Brokers investments, or elsewhere in their taxable accounts. Any losses are first applied to offset any investment gains and then, if any losses are left, up to $3,000 in ordinary income. Harvested tax losses not utilized during the tax period when recognized may be generally carried forward indefinitely to offset future capital gains and income, if any. But capital losses cannot be carried over after a taxpayer's death and are deductible only on the final income tax return filed on the decedent's behalf.

IBKRAM does not monitor for wash sales in client accounts and will not provide notice of wash sales to clients investing in any of its portfolios. Clients are responsible for monitoring their and their spouse’s accounts, including their IBKRAM investments, other investments in Interactive Brokers LLC account(s), and other investments, to confirm that transactions in the same or substantially similar security do not create a “wash sale,” i.e., a sale at a loss and purchase of same or similar security during the 61-day wash sale period. Very generally, the wash sale rule disallows losses if the security is replaced with a substantially identical security during the wash sale period. Clients may find information on wash sales in their Interactive Brokers 1099-eligible accounts on their daily, monthly and annual Activity Statements. Clients may violate the wash sale rule and be unable to harvest certain of their tax losses if they use multiple tax-loss harvesting providers or brokers. For more information on the wash sale rule and other tax-loss harvesting-related issues, please read IRS Publication 550 and our FAQs.

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IBKRAM blog disclosures

Covestor Ltd doing business as Interactive Brokers Asset Management (“IBKRAM”) is an investment advisor registered with the U.S. Securities and Exchange Commission (“SEC”). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

The content of the IBKRAM Blog includes commentaries written by third-party portfolio managers, freelance writers and IBKRAM employees and does not necessarily represent the opinions of IBKRAM or any of its officers, directors, employees or staff. The content, whether or not provided by IBKRAM, is offered for informational purposes only, does not constitute investment advice, and is not an offer to buy or sell any security. The content of this blog is not a substitute for obtaining professional financial advice from a qualified person or firm. For additional information or questions about this blog, please contact editorial@ibkram.com.

Any investments discussed in this blog that are not identified as being held in a portfolio or portfolios are for illustrative purposes only. There is no assurance that IBKRAM will make any investments with the same or similar characteristics as any investments presented. The investments are presented for discussion purposes only and are not a reliable indicator of the performance or investment profile of any composite or client account. Further, the reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions made by IBKRAM or portfolio managers on its platform in the future will be profitable.

IBKRAM blog commentaries may contain forward-looking statements, information and opinions, including descriptions of anticipated market changes and expectations of future activity. IBKRAM portfolio managers and other blog contributors believe that such statements, information, and opinions are based upon reasonable estimates and assumptions. However, forward-looking statements, information and opinions are inherently uncertain and actual events or results may differ materially from those reflected in the forward-looking statements. Therefore, undue reliance should not be placed on such forward-looking statements, information and opinions.

Any external links provided are offered as a matter of convenience and are not the property or responsibility of IBKRAM. Although IBKRAM has a reasonable belief that the information is factual and up to date, it cannot guarantee the accuracy of the information at these links.

Past performance is no guarantee of future results, nor is it indicative of future performance.

All investments in financial markets involve risk, including the risk of loss, such as a loss of principal and reduction in earnings. Performance of the manager accounts associated with each portfolio has been calculated by IBKRAM on a daily time-weighted basis, including cash, reinvested dividends and earnings, and reflects the deduction of simulated IBKRAM advisory fees and broker commissions to present returns net of fees.

Blog discussions may contain references to portfolio performance. The performance figures stated are net of advisory fees, and include reinvestment of dividends or other earnings. Blog discussions may also contain references or comparisons to indexes or benchmarks.

For additional information regarding the performance of portfolios offered by IBKRAM, index or benchmark comparisons and other information regarding our platform, see the individual portfolio profile pages at http://ibkram.com as well as our Legal Disclosures page and our Informational Brochure.

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