Robo-advisors are known to effortlessly carry out individualised investment strategies and guide clients towards personalised portfolios that match their risk profiles and goals. They are known to withstand stressful and volatile situations; and have surely gained traction in the wake of the Covid-19 outbreak.
However, the robo-advisory scene in Hong Kong is still young and evolving. Fintech firms continue to launch new advisors in this region. However, the debate on their performance during the pandemic in Hong Kong still continues. Are robo-advisors delivering what they promise?
The FSA presented the performance of 2 well-known robo-advisors in Hong Kong to highlight their performance against benchmarks during a downturn. With an increase in job losses and a halt in businesses, robo-advisors Kristal AI and Aqumon in Hong Kong are benefiting from the global lock-in.
Founded in 2016, Kristal.AI uses an algorithm to assess and evaluate investors risk appetite and suggest suitable options. Recently, they witnessed an increase in weekly active users by 21% in March to 5,100. This included both new and current clients from 4,200 in February.
Vivek Mohindra, Hong Kong co-founder of Kristal.AI says the firm has around 10,000 users and in terms of AUM, it manages $100m in client assets from $25m in January last year. Kristal.AI’s algorithms use ETFs for client portfolios of retail investors. However, professional investors’ customizations in portfolios is optionable. Moreover, Kristal AI has been adding new ETFs per month. Some of these provide exposure to asset classes not offered in Asia.
Additionally, interest in investing in Kristal AI has also seen an increase. The website had 35,000 views in January; 70,000 views in February; and 79,000 in March alone. This means that more accounts are opening, and more money is being put in. Vivek Mohindra says that online platforms are the easiest way to manage investments, now that more people are working from home. It’s easier than paying a visit to a traditional bank branch. Moreover, existing users investing in the platform log on regularly to check on their investments due to volatile and stressful market circumstances. Naturally, Kristal AI has seen a few account closures as some users wish to put more cash back into their accounts. However, most of the user base that is still invested are not over the age of 40 and hold a long-term view after investments.
Powered by Hong Kong based robo-advisory firm Magnum Research, Aqumon launched in 2018 and assigns 10 different risk profiles to investors depending on their investment appetite. There can be up to 13,000 varied combinations for one person and investors can invest in Hong Kong and US listed ETFs.
Ken Shih, Hong Kong based head of sales and marketing confirms an increase in both users and new assets despite the COVID-19 outbreak. Mobile app downloads increased by 16% during the first quarter of 2019 and net inflows increased by 91%. They experienced a 317% increase in account openings compared to the previous quarters. Aqumon users are also long-term investors. In this quarter, only 10% of their users declined their risk portfolios and rebalanced them. Other clients maintained their current risk portfolios by following Aqumon’s rebalancing instructions. Additionally, Aqumon partnered with an insurer in Hong Kong earlier this year to digitize its investment linked product.
Robo-advisors have definitely grown with the digitization trend. Hong Kong remains the “freest economy in the world” and continues to attract interest from investors globally.