[Question] Titan (the Wealthfront of active stock picking) - What’s the catch?

Titan is a Y Combinator startup that launched in 2018 and aims to do for active investing what Wealthfront, Betterment and Vanguard have done for passive investing.

They pick a basket of 20 companies with $10B+ market cap which they believe are above-average long-term-focused investments relative to the whole S&P 500.

Originally, their stock picking was done via a deterministic process of copying what a group of top hedge funds were reporting that they were doing. I’m not sure if that’s still the case.

Their 2018-2020 performance has been 16.8%/​yr (net of fees) compared to 10.0% for the S&P 500, and a higher Sharpe ratio (.77 vs .51).

My question is, what’s the catch?

Here’s my guess: They’re buying high-quality companies at high prices. That’s how they can expect to have steady market-beating returns for a few years, until momentum reverses and/​or once-in-a-few-years risks play out, at which point their P/​E multiples will shrink and they’ll plunge all the way down to cumulative market-matching returns, and worse after subtracting their fees.

Their “process” page claims they look for a Warren Buffet style “Margin of safety”:

Valuation is important. We seek companies that are trading at a meaningful discount to our estimate of their long-term intrinsic value, with little to no risk of permanent capital impairment.

But I’m not convinced there’s much substance to their use of this term.

More (vague) info about how they pick stocks here.