How do robo platforms perform?

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FSA starts the third year of its performance feature, which reports monthly returns versus a benchmark for three robo-advisors.

The robo-advisory landscape in Asia remains nascent compared to its western counterparts. However, fintech firms have continued to launch robo-advisories in the region, and both fund and wealth managers are exploring the platforms.

Fund managers, especially ETF providers, view them as an additional channel for distribution, while a number of wealth managers have entered into B2B partnerships with robo-technology providers to diversify advisory offerings.

However, the debate on performance continues to be missing. Do the algorithm-driven portfolios actually deliver what they promise?

Last month, we completed the second round of robo-advisory participants, with the final results here.

FSA starts its third year of the feature, with participants Hong Kong-based Aqumon, Kristal AI, which is operational in Hong Kong, Singapore and India, and Sydney-based Raiz, which is expanding in Southeast Asia.

On 1 July, we made a hypothetical investment of $1m in each of these three robo-advisors. The results in today’s first article show what that $1m is now worth. Return results will be published monthly until August 2019.


FSA ROBO-ADVISOR SHOWCASE

Note: Three portfolios for each robo-advisor are presented – cautious, balanced, and aggressive. However, because the firms operate in different markets and offer different products, the robo-advisors are not competing against each other but against their own benchmarks.

In addition, FSA does not have direct access to each robo-advisors’ app or platform, and performance figures are provided to us monthly through the firm’s official factsheet.

 

Benchmarks used: Conservative portfolio: iShares iBoxx USD Investment Grade Corporate Bond ETF; Balanced portfolio: 70% iShares iBoxx USD Investment Grade Corporate Bond ETF + 30% SPDR S&P 500 ETF; Aggressive portfolio: 40% iShares iBoxx USD Investment Grade Corporate Bond ETF + 60% iShares MSCI ACWI ETF

 

Founded in 2016 by Asheesh Chanda and Vineeth Narasimhan, Kristal AI has become operational in India, Singapore and Hong Kong, with clients across Asia, the Middle East and the Americas. Its platform makes use of an algorithm that considers investor goals and risk appetite to suggest the most suitable investment options.

For retail investors, the platform’s algorithms make use of ETFs for client portfolios. Professional investors, meanwhile, have the option to make customisations in their portfolios, such as investing in individual securities, options and futures.

Kristal AI does not charge any fees, such as advisory, brokerage and performance fees, for account balances less than $50,000. Accounts exceeding $50,000 are charged a flat 0.3% per annum.


 

Note: Raiz’s portfolios are only in Australian dollars. Benchmarks used: Conservative portfolio: 15% ASX 200 + 10% MSCI AC World (ex-Australia) + 45% S&P/ASX Australian Government Bond Index + 30% S&P/ASX Corporate Bond Index; Balanced portfolio: 30% ASX 200 + 20% MSCI AC World (ex-Australia) + 25% S&P/ASX Australian Government Bond Index + 25% S&P/ASX Corporate Bond Index; Aggressive portfolio: 43% ASX 200 + 30% MSCI AC World (ex-Australia) + 7% S&P/ASX Australian Government Bond Index + 20% S&P/ASX Corporate Bond Index.

 

Australian robo-advisory firm Raiz Invest launched its mobile robo app in 2016. The platform has A$347m ($233.1m) in AUM and has gathered 700,000 sign-ups, with 194,000 active monthly customers.

Users can invest in either domestic superannuation accounts or in a portfolio of ASX-listed ETFs. The platform charges investors flat fees of A$2.5 per month for accounts under A$10,000 or 0.275% per year for accounts more than A$10,000.

Raiz Invest has expanded outside its home market and has targeted Southeast Asian investors. In December, it gained relevant licences in Indonesia and expects to roll-out its robo-advisory platform in the country by the third quarter. In May, it signed a joint venture agreement with Malaysian asset management firm Permodalan Nasional Berhad (PNB) and expects to launch a robo platform by the end of the year.


 

Benchmarks: Conservative portfolio: 20% MSCI All Country World Index + 80% Barclays US Aggregate Bond Index; Balanced portfolio: 60% MSCI All Country World Index + 40% Barclays US Aggregate Bond Index; Aggressive portfolio: 80% MSCI All Country World Index + 20% Barclays US Aggregate Bond Index

 

Hong Kong-based robo advisory firm Magnum Research launched Aqumon in 2018 for retail investors and has since gathered 5,000 clients in Hong Kong, with an average investment of HK$200,000 ($25,498) from each investor.

The platform assigns 10 different risk profiles to investors depending on their investment appetite. However, there could be up to 13,000 different comibnations for each individual. Investors have the option to invest in either Hong Kong-listed or US-listed ETFs.

The service does not have a subscription fee and has a 0.8% annual investment advisory fee.

Besides Aqumon, Magnum Research has entered into B2B partnerships with a number of distributors and instituitons in the region, which include Shenzhen-based China Resources Bank of Zhuhai, China Resources Bank and BOC International in Hong Kong.

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