I recently interviewed Kenneth Shih, head of Sales at AQUMON, a Hong Kong-based robo advisor that delivers investing strategies to help investors obtain excess return and focus on long-term stable investment. Previous to his position at AQUMON, Kenneth was a Director at UBS Private Bank in Hong Kong, managing the bank’s investment content and having 14+ years in banking. He graduated from the University of Wisconsin-Madison, with a degree in Economics.
You can read the complete interview below:
1. AQUMON is an algorithm-based robo advisor, that promises to make investing simpler and more affordable. Can you explain how it works and uses machine learning to create a balanced investment portfolio?
Basically, AQUMON is offering an app and web-based digital wealth management experience for our end users. After opening an investment account at AQUMON, users complete an online risk questionnaire which lets us understand their personal risk tolerance and risk preference. After receiving the answers our algorithm will immediately customize a tailor-made investment portfolio based on their risk classification (from moderate to aggressive). This portfolio is multi-asset (investing in stocks, bonds and commodities etc.), globally diversified and invests into cost-effective and liquid exchange-traded funds (ETFs).
For our basic investment portfolio, machine learning will help us clean the data and build the portfolio for investors. The automation, 24/7 monitoring, and rebalancing features will definitely help our users’ portfolios stay balanced at a click of a button.
2. How is it different from other robo advisers?
Almost all robo advisors are investing in ETFs only and are quite passive in terms of their investment offerings. What makes AQUMON quite different is beyond investing in ETFs we have investment strategies that pick individual stocks and also invest into mutual funds.
This is possible because of both our Algorithm team and IT team at in-house. Our 10+ person Algorithm team comprises of 60%+ PhDs originated 8 new algorithm-based investment strategies for our users in 2018 alone. A number of these strategies are machine learning based.
These strategies are already seeing high demand on the financial institution (B2B) level. Our 30+ person IT team helps us quickly and smoothly implement these strategies or our robo advisory services with our B2B clients. Normally requiring only 4-8 weeks which is extremely quick.
We also have plans to roll out to these investment strategies to individual investors (B2C) in 2019.
3. Can you tell us some of the numbers and impact of the platform in 2018, as opposed to 2017?
We think 2018 is a much better gauge of an investment platform’s ability given the high volatility in global markets. In 2017 markets were pretty much only going up so everyone in general performed positively.
For our global asset allocation strategy which mainly follows the market our returns ranged from -1.8% to -8.5% (versus the benchmark of -3.2% to -10%) in 2018. So our clients already see outperformance by using AQUMON. As a comparison, for investors who only bought stocks, the US S&P 500 index was -7.03% and the Hong Kong Hang Seng Index was -14.76% for 2018.
Where AQUMON really shined was in our Machine Learning based stock picking strategies. Our investment strategy for investing in mainland China stocks (A-shares) and Hong Kong stocks outperformed the benchmark by 17% to 23%+. Our Hong Kong stocks portfolio had +3.63% annual return while HK stocks with hedging feature had +10.92% annual return in comparison to the Hang Seng index which was -14.76% for 2018.
4. AI is still in its early stages. What is the kind of response you get from traditional financial institutions, in embracing AI technology?
You are right AI is still in its early stages but interest has been promising by a traditional financial institution in terms of embracing this. In facing the new world, institutions also think that it is harder to reach their goal in using traditional ways. AQUMON currently has over 30+ partners on the institutional level. Naturally, in the early stage, we still see a lot of financial institutions figuring things out in terms of whether this is applicable in terms of both their internal policy and IT platform. Furthermore, progression in terms of regulation has been another major factor in adoption speed.
5. AQUMON offers its fully-automated portfolio in China. Any plans for global expansion for international’s client?
The main market AQUMON currently focuses on are users here in Hong Kong. In 2018 we also opened up our services to users in mainland China. There is a distinction since both markets are regulated differently. The next step after is mainly looking at regional expansion in Asia.
6. Tell us about the future plans and products.
There are a number of things going on in our big plans. Immediately in 2019, we will be rolling out a new version of our website and app which we think will greatly benefit the end user experience. Furthermore, we are also improving our platform capabilities in terms of becoming our own execution platform which will help our users onboard quicker and further reduce the fees they incur. We also shortly will have asset management capabilities (we currently have advisor capabilities) and users will benefit from this as well.
Products wise we will be launching an ultra-low risk product that collects 2%+ yield called SmartDeposit which will be very suitable for users in the current investment environment. We also have other products lined up to launch shortly after.
Beyond that many Asian investors particularly here in Hong Kong and China don’t know what is a robo advisor, and we aim to popularized the robo advisor concept and in turn, continue to offer added benefits to more investors in the region.