'Robo Advisor' Is Smart.. EMP Return Rate 11%

[Asia Economy Reporter Hwang Junho] While the stock market trended upward last year following the COVID-19 pandemic, robo-advisor funds managed by artificial intelligence (AI) recorded returns similar to those of human-managed funds. Although they fell short of the ideal of outperforming humans by calculating more accurately and delivering higher returns, it is analyzed that they have secured trust by achieving returns comparable to humans. The asset management industry has even introduced funds where AI directly makes investment decisions.

According to Zeroin, a fund rating agency, on the 8th, among the robo-advisor EMP funds (excluding 100% fund allocations) managed in South Korea, the six stock-mixed type funds, which hold the largest share, posted a one-year return of 11.78%. This is slightly higher than the 11.41% return of 10 similar funds managed by fund managers. Considering that robo-advisor fees are generally lower than those of human-managed funds, the difference in returns can be seen as even greater. However, within robo-advisor funds, the return variance was large, ranging from 1.81% to 24%. Additionally, looking at bond-mixed funds, the return of funds managed by fund managers was 10.51%, outperforming robo-advisors (6.30%) by 4.21 percentage points.

Typically, robo-advisor funds operated by asset management companies or securities firms are mostly managed as EMP funds. EMP funds hold more than 50% of their total assets in exchange-traded funds (ETFs) or exchange-traded notes (ETNs). Among EMP funds, stock-mixed and bond-mixed types are the most common for robo-advisor funds.

The term robo-advisor combines "robot" and "advisor," referring to an AI-powered algorithm that analyzes big data to provide investment strategies to fund managers.

An asset management industry official stated, "There appears to be no significant difference in returns between humans and robo-advisors," adding, "However, the large variance in robo-advisor returns across different management companies is a key point when selecting products."

As the returns of robo-advisors have been proven, AI funds that are involved in actual investment execution are also emerging. KB Asset Management’s All Asset AI Solution Fund (EMP), launched last year, uses its proprietary AI solution ‘Anderson’ to make investment decisions and achieved an 8.16% return over the past six months. Mirae Asset Management and Samsung Asset Management are also considering developing similar funds.