Ai-type Funds Outperform Star Fund Managers
Fund management based on artificial intelligence (AI) is becoming increasingly common in the Korean fund management industry.
In the second half of last year, most of the public offering funds suffered a plunge in return rate but AI-based funds fared relatively well. In the securities industry, stock trading using AI has increased dramatically. Likewise, funds managed by AI are growing. Especially, as financial authorities have eased regulations on robot funds, AI-powered funds are expected to become more popular in the fund industry.
GQ Asset Management is planning to launch an AI-based private equity fund worth 20 billion won towards the end of February. The company is preparing an AI-based fund that combines domestic derivatives, overseas currencies, and quant strategies, in cooperation with Incizor, a big data analysis company. Large brokerage firms such as Mirae Asset Management and Daishin Securities have launched AI-based funds, but it is unusual to launch an AI-type private equity fund.
AI-based funds performed better than expected last year, with 14 of the 40 AI-operated funds significantly outperforming star fund managers. They posted a return rate of minus 1 percent even when the market crashed last year. In the case of the NH-Amundi December Global Robo Adviser Fund, the one-year return was 2.05 percent, a positive return even in a market crash. Mirae Asset AI ASEAN Fund (minus 0.44 percent), Kiwoom Quarterback Global EMP Robo Advisor Fund (minus 1.26 percent) and Daishin Advisor Fund (minus 2.72 percent) all exceeded the average return of domestic active equity funds (minus 10.37 percent).
As stock market uncertainties have grown, interest in AI funds, which are not influenced by human emotions, has gotten greater. Some stock market analysts say that AI is more reliable in an environment where global volatility has increased due to the U.S.-China trade dispute and Brexit. "When the stock market is on a roller-coaster ride, a robot advisor system based on a specific algorithm can have merits," says an official of a fund management company. "Initially, AI was used for asset allocation but recently, it is used for fund operations, such as stock selection."
Recently financial authorities dramatically lowered the equity capital requirement for fintech companies from four billion won to 1.5 billion won when they conclude an investment discretionary contract with customers. This allowed fintech companies to enter the robo adviser fund market and compete with existing fund management companies. Asset management companies are on alert. Samsung Asset Management is reportedly preparing a new AI product by forging a strategic alliance with Deep Search, which provides financial data based on AI. Assetplus Investment Management is developing an artificial intelligence platform independently and Mirae Asset Management established a joint venture with Craft Technologies, a company where it has made an equity investment.