A Hot IPO in Silicon Valley
Financial Engines, a San Carlos company that provides investment advice to 401(k) plans, went public on March 16th, at $12/share. It closed at $17.60 on Friday, 3/19/10, up 47%. Co-founded by Noble Laureate William Sharpe, and backed by several VC and private-equity investors, the company contracts with sponsors of 401(k) plans to provide site-specific advice to employees on optimising their investment results. It collects fees from the sponsors on a contract basis.
William Sharpe is known for the widely used Sharpe Ratio, among other things. It calculates how much return a portfolio earns compared to the volatility of those returns. With many individuals too busy or too shell-shocked by recent turmoil in financial markets to manage their own 401(k) plans, this is a promising business model, and one that gives some peace of mind to companies and their employees.