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MCAs for Active & Passive Investors

August 7, 2023

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Person swimming in a lake Active Investor

There are two types of investors in the world: Active and Passive. Active investors are those who seek to outperform the market by making investment decisions that are based on their own research and analysis. They typically invest in a variety of asset classes, including stocks, bonds, commodities, and real estate. The frequency with which active investors check or adjust their accounts varies depending on their individual investment goals and risk tolerance. Some active investors may check their accounts daily, while others may only check them once a week.

There are a few factors that can influence how often an active investor checks their accounts. These factors include:

  • The volatility of the market: If the market is volatile, active investors may need to check their accounts more frequently to make sure that their investments are on track.
  • The type of investments: Some investments, such as stocks, are more volatile than others, such as bonds. This means that active investors who invest in stocks may need to check their accounts more frequently than those who invest in bonds.
  • The investor’s risk tolerance: Investors with a high-risk tolerance may be more comfortable checking their accounts less frequently than those with a low-risk tolerance.

Now, on the other side of the spectrum is the passive investor.  A passive investor is one who does not try to actively pick individual investments or time the market. Instead, they invest in a broad range of assets, such as index funds or ETFs, that track a specific market index. Think, of the set-it-and-forget-it model. Passive investors do their research / due diligence, invest, and then watch and wait. Essentially, they are firm believers in trusting the process.

Passive investors believe that it is difficult to consistently beat the market over the long term and that the best way to achieve investment success is to simply invest in a diversified portfolio and hold it for the long term.

There are several advantages to passive investing. First, it is a relatively low-cost investment strategy. Passive investments typically have lower fees which can save investors money over time.

Second, passive investing is a more hands-off approach to investing. Passive investors do not need to spend a lot of time researching individual investments or making trading decisions. This can free up time for other activities, such as work or family.

Third, passive investing has been shown to be a successful investment strategy over the long term. Studies have shown that passive funds tend to outperform actively managed funds over time.

Of course, there are also some disadvantages to passive investing. First, passive 

Active and Passive Investing on Supervest

Not only are there active and passive investors, but investments can also be active or passive. For example, on the Supervest platform, there are two types of investments, MCA Notes and Self-Directed MCA. Supervest MCA Notes is an example of an investment geared towards Passive Investors. They have set terms, target returns, potentially pay on a set schedule, and are managed by the team at Supervest.  Once an individual is invested in their note of choice, there is little else to do except check monthly/quarterly payments are being made on time and in full. You can read more about the performance of Supervest’s MCA Notes here.

Supervest’s Self-Directed MCA offering is built for active investors. It requires investors to have a working, usable knowledge of the MCA space and set their own investment criteria which should be reviewed/managed on a frequent basis.  Self-Directed MCA is also not a short-term investment.  There is a level of duration that should be expected by all investors.  We recently conducted a study, included below, that demonstrates the correlation between duration and performance* within Supervest’s Self-Directed MCA Offerings. 

*Past performance is not a guarantee of future results.  The investment strategies and/or investments discussed have been profitable in the past, but there is no guarantee that they will be profitable in the future. The investment strategies and/or investments discussed may not be suitable for all investors. Past performance is only one factor to consider when making an investment decision and it does not take into account the fees that are associated with an investment.

Self-Directed MCA Duration vs. Performance

When investing in the MCA asset class, the key to developing a profitable portfolio and maximizing returns is steadily accruing receivables across a diverse set of risks spread out over multiple vintages.  Via the Supervest platform, investors have the benefit of receiving daily payments against their investment balances, allowing them to quickly recycle those into new opportunities.

Depending on the velocity of repayments and redeployment, an investor can often fund into the deal flow between 2-3x their initial deposit within a 12-month period, maximizing the overall receivables while building a larger buffer against defaults and performance volatility.

A recent study of underperforming vs. strong-performing portfolios demonstrates a direct correlation to longevity on the platform, maximizing receivables compared to increased returns.  The study was comprised of 10 distinct investor accounts with portfolio sizes ranging from $25k to over $2M.  In this sample, underperforming portfolios, on average, were active on the platform for 4 months and had a ratio of funded investments to platform deposits of 1.2:1.  Portfolios exhibiting strong performance had an average platform lifetime of almost 2 years with a ratio of funded investments to platform deposits almost 4:1. 

Pitfalls for short-term portfolios are driven by a bevy of reasons:

  • Pausing funding after 1-2 months to track outcomes of initial investments.  This prevents these portfolios from accruing additional receivables and at risk of a drop in performance for the portfolio if there is any increased delinquency in the initial vintage(s).
  • Over-concentration in the initial month of funding by setting monthly funding caps across all active criteria that equal or exceed the total initial deposit amount.  This setup has the potential to deploy all deposited funds in the first month of investing, leaving little available in an offering balance to fund into subsequent vintages, missing out on additional opportunities.
  • Single criteria setup where minimal filters are utilized and funding size into investments is equal across all risk tiers.  This configuration is ripe for an overconcentration into higher-risk opportunities, where units are more readily available on a day-to-day basis.  Investors are encouraged to take advantage of these available opportunities at low dollar concentration but upsize funding allocation for lower risk (longer term, larger Total Funding investments) where unit counts are lower, but available $ for investment is much higher on a per submission basis.

 For both long and short-term portfolio types, targeted funding and $ concentration across multiple criteria sets remains the most important factor in optimizing returns.  A larger portfolio that has accrued 4x plus the amount of funding has an additional buffer to withstand an uptick in delinquency without sacrificing a sizeable portion of their returns but can guard against this volatility by targeting concentration into investments based on perceived risk.


Active investors should concentrate on self-directed MCA because it allows them to have more control over their investments. They can set their own investment criteria and make adjustments based on their own research and analysis. This gives them the potential to achieve higher returns.

However, self-directed MCA is not a passive investment. It requires active investors to monitor their investments on a frequent basis and make changes as needed to their investment criteria. This can be time-consuming and require a high level of knowledge about the MCA space.

Passive investors, on the other hand, should look to invest in Supervest MCA Notes because they are a more hands-off investment. They do not need to spend time researching individual investments or making frequent decisions. This frees up time for passive investors to focus on other activities essentially making their money work harder for them.

Supervest MCA Notes also have the potential to reduce volatility risk compared to Self-Directed MCA. This is because they are managed by the Supervest team, who have a deep understanding of the MCA space.

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