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Robo-advisor performance: December 2019

All portfolios were up in December except Raiz portfolios, which faced downward pressure from Australian equity and bond markets.
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In Asia, fintech firms have been introducing robo-advisory platforms while asset and wealth managers continue to explore them.

Fund groups, 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. Do the algorithm-driven portfolios actually deliver what they promise?

We therefore present the monthly performance of three robo-advisors. The purpose is to highlight how robo-advisors allocate and how they perform against their benchmarks, particularly when there is a downturn.

Additionally, we want to help self-directed individual investors make a comparison with their own results. Wealth managers can check robo-advisor performance against client portfolio results and the rest of the industry has useful data to help form a judgment on the robo-advisor phenomenon.


FSA ROBO-ADVISOR SHOWCASE

PERFORMANCE ON 1 JANUARY 2020

Note: Three portfolios for each robo-advisor are presented – cautious, balanced, and aggressive — each with an initial investment of a (hypothetical) $1m.

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.


 

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.

Kristal AI now has around 7,000 users. In terms of AUM, assets have grown to at least $100m from $25m in January last year.

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 buying investment products that are not available to the retail segment.

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.

The firm has been adding new ETFs every month to its platform, some of which offer exposure to asset classes that are not usually offered in Asia, such as stocks in the cannabis and uranium sectors.


Note: Raiz’s portfolios are only in Australian dollars

 

Australian robo-advisory firm Raiz Invest launched its mobile robo app in 2016. As of the end of December, the platform has A$444m ($305m) in AUM and around 211,000 active monthly customers, according to exchange filings.

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 and expects to launch a robo platform by the end of the year.


 

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 combinations 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.

This month, the firm also launched a stand-alone all-bond ETF portfolio for Aqumon users.

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

Part of the Bonhill Group.