Covestor joins the ranks of funded investment sites

Covestor, an investing community site, has raised $6.5 million in its second round of funding. The London and New York-based company plans to build out its asset management platform, which helps its users make investment decisions.

Covestor targets both average investors and professional fund managers. The site mines information from real portfolios on online stock brokerages, giving a holistic view of different risk levels and investment strategies. In all, it tracks 150 variables

The fund management platform is what Chief Executive Rikki Tahta believes can allow the average user to make better decisions than the pros. Tahta has compared Covestor.com to Facebook, in that it wants to bring a sense of trust and real-world verification to the online social investing community that is missing in other investment sites.

The site claims the number of ‘money managers’ it hosts is ten times the number of managers that work for any single professional firm in the world, including giants like UBS or Goldman Sachs, whose consumer investing divisions Tahta thinks are in direct competition with his company.

Covestor’s business model is a bit less certain: The company plans to let fund managers earn revenue by charging minimal fees to the investors who follow them, just as real fund and hedge fund managers do, while the company will keep a portion for itself.

Well known venture capitalist and blogger Fred Wilson, who happens to be an investor in Covestor through his firm Union Square Ventures, writes that social platforms such as Covestor “might be the best option for investors looking to generate outperformance in the market.” He shares his stock portfolio performance (not good; see left).

While Wilson has put his proverbial money where his mouth is, whether Covestor can separate from the growing field of social investment sites including Zecco and Cake Financial remains to be seen. Back in February, we made up a list of 11 contenders for the social investing market.

Union Square Ventures, New York-based Spark Capital, and European firm Amadeus Capital all participated in the round, which will place Todd Dagres of Spark and Albert Wenger of USV on the Covestor board. USV participated in the first company’s first $1 million round of funding. The company is based in New York City.

David Adewumi, a contributing writer with VentureBeat, is the founder & CEO of http://heekya.com a social storytelling platform billed “The Wikipedia of Stories.”