Robo-advisor performance November 2017

Data & Research

FSA joins the robo-advisor discussion with its monthly feature showing portfolio returns of three robo-advisors serving clients in Asia.

Robo-advisor performance March 2018

On July 1, 2017, we made a hypothetical investment 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 December 2017

 

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 non-sharia portfolios.

The basis of Algebra’s portfolios is the Large Cap Master Select Gold 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 analysis of portfolios of ten highly-rated active US equity fund managers. From each manager’s portfolio the algorithm chooses five stocks in which they are overweight. The three model portfolios presented here contain a different allocation of fixed income to manage the risk profile. The annual fee is 0.85%.

Martin Young, CEO of Farringdon Asset Management, attributed the strategy’s November performance to the broadly rising US market. He named Nett App (a data storage and management company), 21st Century Fox,  Charles Schwab Corporation, Fed Ex and Southwest Airlines among the companies that brought in highest returns in the portfolio. Following the managers of the underlying portfolios, “[the strategy has] continued to reduce holdings in tech stocks and move in to more traditional asset sectors as we see the recent boom in tech stocks coming to an end,” Young told FSA.

 

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. Over the past two months, the conservative and the balanced portfolios have tilted away from equities and towards fixed income. Bond ETFs now constitute 55% of the conservative portfolio, up from 44% on 1 October. The allocation to equities in the conservative portfolio was reduced to 30% from 37% and that to alternatives to 15% from 18%. The balanced portfolio now has 23% in fixed income, up from 19% two months ago. Its equity allocation has been reduced to 59% from 66% and 3% were added to alternatives. The asset allocations in the aggressive portfolio have not changed since 1 September.

 


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. Marketriders currently has 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.


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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