Ro­bot-ad­vised funds out­per­form bench­mark KOSPI

The Korea Times - - FINANCE - By Lee Kyung-min [email protected]­re­atimes.co.kr

Ro­bot-ad­vised as­set man­age­ment with bet­ter-than-ex­pected profit is emerg­ing as a pre­ferred al­ter­na­tive to risk-averse in­vestors amid height­ened volatil­ity in the fi­nan­cial mar­ket, ac­cord­ing to data and in­dus­try ex­perts, Fri­day.

Also re­ferred to as robo-ad­vis­ers, the class of fi­nan­cial ad­vis­ers pro­vide in­vest­ment man­age­ment on­line. Ex­e­cuted by math­e­mat­i­cal rules or al­go­rithms, these re­quire only min­i­mal to mod­er­ate hu­man in­ter­ven­tion.

Ac­cord­ing to data from FnGuide, a fi­nan­cial in­for­ma­tion provider, 12 machine-ad­vised funds have gen­er­ated an av­er­age of 8.16 per­cent yield from Jan.1 to Oct. 1. This is over dou­ble the fig­ure from the bench­mark Korea Stock Price Index (KOSPI) 200 which jumped 4.75 per­cent in the same pe­riod.

The hand­some per­for­mance con­trasts with the volatile stock mar­ket that un­der­went se­vere fluc­tu­a­tion amid the lin­ger­ing un­cer­tain­ties and neg­a­tive developmen­ts of the global fi­nan­cial mar­ket.

Sep­a­rate data from KOSCOM, de­vel­oper and op­er­a­tor of the core IT sys­tems in the Korean cap­i­tal mar­ket and fi­nan­cial in­vest­ment in­dus­try, showed 35 prod­ucts rec­om­mended by robo-ad­vis­ers based on dif­fer­ing risk pref­er­ences all gen­er­ated yields over the past few months, all the while KOSPI, KOSPI 200 and sec­ondary KOSDAQ all plum­meted.

Be­tween Fe­bru­ary and Au­gust, the machine-rec­om­mended prod­ucts saw yields be­tween 0.71 per­cent and 1.63 per­cent, while the KOSPI dropped 10.37 per­cent, KOSPI 200 8.74 per­cent and KOSDAQ 16.51 per­cent.

Ac­cord­ing to KOSCOM, about 1 tril­lion won ($840 mil­lion) in as­sets were man­aged by the ro­bot-ad­vised ser­vice in Korea in 2018, while the fig­ure was 543 tril­lion won around the world in the same pe­riod.

The fig­ure is ex­pected to sur­pass 5 tril­lion won in Korea in 2020 and 18 tril­lion won in 2022, while that from around the world will be 1,442 tril­lion won and 2,232 tril­lion won, re­spec­tively.

The prospect is brighter for the bud­ding ser­vice af­ter the Fi­nan­cial Ser­vices Com­mis­sion eased re­lated reg­u­la­tions in May to make it eas­ier for as­set man­age­ment firms and bro­ker­ages to use the help of ar­ti­fi­cial in­tel­li­gence-me­di­ated con­sul­tancy.

“Four fi­nan­cial ser­vices firms have adopted robo-ad­vis­ers to boost profit as of now. The ser­vice is ex­pected to grant more ac­cess to the broader cus­tomer base with lower cost,” Korea Cap­i­tal Mar­ket In­sti­tute (KCMI) re­searcher Lee Sung-bok said in a July re­port.

More sta­ble and re­spon­si­ble man­age­ment will be pos­si­ble given the dis­pas­sion­ate machines, un­like hu­man be­ings, are not dis­tracted by panic-in­duced surge of emo­tions, ac­cord­ing to an ex­pert.

“Machines by def­i­ni­tion are not in­flu­enced by emo­tions and stay un­af­fected in the event of mas­sive sell-offs. They op­er­ate ac­cord­ing to an al­go­rithm and al­go­rithm only,” KCMI se­nior re­search fel­low Lee Hyo-seob said.

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