An AI-based automated trading program will be used to launch an active equity fund.
ResearchAlum announced on the 14th that DB Financial Investment will begin selling the ‘RanksTrade’ fund, which utilizes an AI automated trading program. The fund is managed by Andover Asset Management and uses an AI-based stock recommendation system developed in-house by ResearchAlum.
The RanksTrade fund operates with the core competitive advantage of providing optimized investment strategies in the rapidly changing financial market by combining AI analysis technology with analysts’ data. Before the stock market opens on business days, RanksTrade’s AI system selects analyst reports from the day’s published reports that have historically demonstrated high influence.
Previously, ResearchAlum filed a patent in 2020 related to the ‘Method for recommending stock items based on analyst reports.’ They built a database (DB) of approximately 130,000 officially published reports over the past five years and compiled short- and long-term returns following the publication of analyst reports. The AI model trained on this data analyzes the expected returns and loss tolerance of each stock to assist in fund management.
Until now, trading orders were induced through marketing activities such as seminars or joint visits conducted by analysts targeting fund managers. The RanksTrade fund transmits trading orders through the brokerage of the securities firm where the analyst who authored the AI-selected report works. This is expected to help create an environment where analysts can focus on market analysis and research.
The fund applies a differentiated system from traditional fund management methods to minimize risk while pursuing stable returns. While partially utilizing characteristics of high-frequency trading (HFT) strategies, it adopts an approach distinct from conventional ultra-short-term, ultra-high-frequency trading methods. Instead of excessively frequent trades, it builds profits with a strategy aiming for 2-3% returns per stock.
It minimizes holdings overnight to reduce unpredictable risks that may occur after market close. The system is designed to optimize trading frequency according to market conditions.
Backtesting of the RanksTrade fund from January 1 to the end of December last year demonstrated a 39% return even during periods when the domestic stock market declined, proving it to be an effective investment strategy in volatile markets.
Choi Seonghwan, CEO of ResearchAlum, said, "The approval for DB Financial Investment to sell the fund signifies that AI-based investment models have been recognized for their practical value even in traditional financial markets," adding, "We will enable many investors to experience AI-based investment strategies."
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