San Francisco-based fintech startup Frec announced Tuesday it has raised $26.4 million in seed and Series A funding led by Greylock. The company aims to make sophisticated investment strategies more accessible through its suite of automated, self-service products.
Frec's flagship offering is Frec Direct Indexing, which provides customized index investing combined with tax optimization. Through algorithms performing daily tax-loss harvesting, Frec says Direct Indexing can capture up to 45% of an investment's value in capital losses. When reinvested, this can increase returns by 2.11% annually.
Direct Indexing also enables customization by letting investors add or remove companies and sectors from indexes. Frec is licensing S&P indices and charges a 0.10% fee for the service. This positions it competitively against robo-advisors charging 0.25% for basic index investing, or wealth managers charging up to 1% for direct indexing.
"We built Frec for the financially-savvy who want access to sophisticated products not offered by existing platforms," said founder Mo Al Adham in a statement. "We made it our mission to enable access to advanced financial products to help customers stay invested in volatile markets."
In addition to Direct Indexing, Frec offers other products including Frec Treasury for earning up to 5.02% on cash and portfolio lines of credit enabling borrowing against stock holdings. Frec also partners with AngelList to power money market funds for venture capital investors.
The company says the $26.4 million funding round included participation from Social Leverage and other investors. Greylock Venture Partner Josh McFarland said analysts predict direct indexing will outgrow ETFs and mutual funds over the next five years, making Frec's launch well-timed.
The startup aims to open up sophisticated money management techniques to a wider audience through technological automation and simplicity. With this new backing, Frec continues its march to disrupt wealth management for both retail and institutional investors.