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 February 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.
Tuomi RA’s portfolios target a specific level of volatility. Asset allocation is adjusted if the volatility deviates from the target. The balanced portfolio continued its shift towards equities, reaching 67% allocation, up from 57% in November. The asset allocations of the conservative portfolio changed only slightly and that of the the aggressive portfolio remained unchanged during this period.
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. As of next month, the firm will be rolling out new risk-optimised portfolios, which aim to deliver the same return while minimising volatility. Following the firm’s recommendation, FSA will switch its hypothetical investment to the new portfolio when it becomes available.
