Despite being a growing reservoir of funds under management, this critically important pool of capital is confronting mounting problems collating and disseminating key data in a timely manner.
The ratings house is pinning its growth strategy on a revamped methodology that increases the emphasis on governance to 25 per cent – a timely move considering APRA’s proposed reforms.
Avatars, not humans, on investment committees: it’s no joke
by Greg Bright
Artificial Intelligence is coming to the investment world sooner than you think. Vontobel Asset Management, the big Zurich-based global manager, now has a product in beta-testing mode, where its investment committee decisions are based on AI. In fact, the committee members are all avatars. And its returns are top decile.
Daniel Seiler, the Vontobel head of multi-asset strategies and a managing director, describes the product as “a hobby”. But the firm has seeded it with real money since last November, and he has also invested some of his personal money in it. It has returned 13.5 per cent since inception, which would give it top-decile status in the multi-asset absolute-return universe. It might actually be number two in the world, after Vontobel’s broadly available multi-asset strategy. Without standard benchmarks, though, absolute returns strategies are difficult to compare.
Seiler’s business unit specialises in quant analysis and strategies. In his role, he oversees systematic and fundamental investment solutions, which are offered by the Vescore and multi-asset brands. Vescore is the quant investing boutique – a brand rather than a separate company – within Vontobel.
To build an AI process, Seiler and his colleagues set out to devise a group of people-reflecting avatars who looked at history when they came to make their decisions for a multi-asset portfolio. Seiler, who teaches at university in his spare time, says that students often criticise such an approach as being too backward looking. But the past provides the only facts on which to go, he says. The future doesn’t provide facts – not until it happens.
“We have brought AI through the value chain,” he said on a recent visit to Australia, being introduced to clients and prospects by local Australia and New Zealand business manager Andreas Faeste. The strategy mimics what the portfolio managers and investment committee members of a human-based fund would do. They look at their past experience and try to draw similarities between current conditions with those of the past. “We asked ourselves: ‘how does an investor think?’ How does he or she make a decision,” he said.
The Vontobel team had a bit of fun with the project too. For instance, committee-member avatars have similar faces to famous economists and investors of the past. “Maynard” has the face of the late great economist John Maynard Keynes. Being a politically correct group of quants, they decided to make the investment committee chair a woman, giving her the name ‘Ami’. They came up with 10-or so faces to give her. As it turned out she is quite a striking young woman. Perhaps they are not as politically correct as they’d like to believe.
The team also built a client interface whereby you can speak, in a virtual sense, with each of the investment committee members, which certainly doesn’t happen in the real world without lots of organisation. Clients can quiz them on what they think.
Vontobel calls its AI product “the multi-asset strategy of the future”.
