Robo-advisor performance February 2018

Data & Research

With the market correction and the return of volatility in February, how did FSA’s hypothetical investments with the region’s three robo-advisors perform against their benchmarks?

Robo-advisor performance March 2018

On July 1, 2017, we made hypothetical investments of $1m in each of the three robo-advisors featured below. The results in today’s article show what that $1m is now worth. Return results will be published monthly until August 2018.

Three portfolios for each robo-advisor are presented: cautious, balanced and aggressive.

The purpose is to highlight the practical angle – how robo-advisors allocate and how they perform over the long-term, particularly when there is a downturn.

Note that the robo-advisors operate in different markets and offer different products. In FSA‘s presentation, they are not competing against each other, but against their own benchmarks.

 


FSA Robo-Advisor Showcase

Performance on 1 March 2018

Algebra is a robo-advisor offered by Malaysia-based Farringdon Group. It was launched in July 2017. It offers sharia-compliant and conventional portfolios. FSA features three non-sharia portfolios.

The basis of Algebra’s portfolios is the large-cap master select gold strategy, a smart-beta stock-picking strategy developed by Singapore-based Farringdon Asset Management. The portfolio consists of around 50 US stocks from the S&P 500 universe. They are selected based on the analysis of portfolios of ten highly-rated active US equity fund managers. From each manager’s portfolio the algorithm chooses five stocks in which the fund is overweight to include in the portfolio. The three model portfolios presented here contain a different allocation of fixed income to manage the risk profile. The annual fee is 0.85%.

 

Beijing-based Creditease Wealth Management launched Toumi RA, its robo-advisory platform, in May 2016. It is currently offered to investors in mainland China. It offers offshore US dollar-denominated portfolios of global ETFs, holding equity and bond ETFs as well as gold and real estate. It has nine levels of risk for investors to choose from. FSA features three portfolios with the risk levels: 2 – second lowest, 5 – moderate and 8 – second highest. Creditease does not charge fees.

Toumi RA’s portfolios target a specific level of volatility. The asset allocation is adjusted if the volatility deviates from the target. In February, the cautious and balanced portfolios de-risked by shifting the allocation to fixed income from equities. The balanced portfolio, in particular, increased its fixed income allocation to 28% from 15% and reduced equities to 56% from 67%. The cautious portfolio shifted 3% of its allocation to fixed income from equities. The asset allocation of the aggressive portfolio has remained unchanged since August 2017.

 

In business since 2008, Marketriders is offered by the US-based brokerage Sogotrade. It was re-launched in March 2017 as a full service robo-advisory service targeting US and Asian clients. Sogotrade has offices in China, Hong Kong and Taiwan. In mid-2017 Marketriders had about $1.2bn of AUM. It offers US-based accounts, and its model portfolios consist of US-based ETFs. Marketriders charges the advisory management fee of 0.265% per year and no transaction fees.

Marketriders’ portfolios have not changed their asset allocation since 1 July.

On 1 March, FSA‘s hypothetical investments at Marketriders were switched to the new low-volatility multi-factor portfolios which the firm is rolling out to its clients. The new portfolios target higher returns per unit of risk by incorporating value and low-volatility ETFs.

The asset allocation remains roughly the same as in the previous portfolios.


All returns are in US dollars, net of fees. Creditease, Farringdon and Sogotrade have given FSA direct access to dummy accounts in their systems to monitor our hypothetical investments.

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