Robo-advisory services gaining traction

GAX MD Sdn Bhd chief executive officer and managing director Ronnie Tan (pic) disclosed that its digital investment management service MyTheo achieved a positive return of 15.96% for its balanced portfolio.

KUALA LUMPUR: Although robo-advisory services are relatively new in Malaysia, it appears to be gaining traction by higher returns from its global diversified portfolio amidst the recent volatile market.

GAX MD Sdn Bhd chief executive officer and managing director Ronnie Tan (pic) disclosed that its digital investment management service MyTheo achieved a positive return of 15.96% for its balanced portfolio.

“Year-to-date, the fund size has grown by 170% and its new account openings jumped by more than 80%.

“The movement control order period also gave the company the confidence on the acceptance of its robo-advisory service, as the total new funds invested were five times more than the amount that were redeemed during this period, ” he said at a webinar on Robo Advisory: The Future of Investing.

During the market volatility period from March to June, Tan confided that MyTheo’s balanced portfolio grew by 9.9%.

MyTheo allows its investors the flexibility to customise their own investment portfolio through its multiple portfolio feature.

In line with its investment strategy, MyTheo has a universe of 59 exchange-traded funds (ETFs) comprising about 10,000 companies in over 86 countries with global returns. Currently, MyTheo invests in 32 ETFs and charges a management fee of 0.5% to 1% per year with no hidden costs.

“The algorithm is sophisticated and the 231 possible customisations allow us to tailor the portfolio to the needs of our investors.

“The portfolio constructed is customer centric and not a one-size-fits-all product. The algorithm will auto-rebalance and optimise the investor’s portfolio on a regular basis, ” he said.

For example, Tan said, investors who are highly conservative and concerned about the low interest regime and market volatility have a choice of switching and investing a 100% allocation in the income portfolio.

From January to June 2020, the income portfolio achieved a return of 7.46% as compared to a return of 1.19% for fixed deposit for the same period.

“Our returns show that investors should look into our investment platform, which is convenient and affordable. Investors should also think about long term and not worry about short term during market volatility, ” added Tan.

MyTheo is a digital investment management service offered by GAX MD Sdn Bhd, a company jointly formed by Silverlake Digital INX Sdn Bhd and Money Design Co Ltd, Japan.

Money Design Japan pioneered the robo-advisory service in Japan back in 2016.

GAX MD Sdn Bhd chief operating officer Matthew Stuart-Box cited an example of Japanese investors during the Covid-19 crisis, saying that its investors have remained calm with low levels of withdrawals, maintaining regular monthly contributions and had a steady flow of new account openings in the country.

“Majority of our customers in Japan practice dollar-cost averaging, which means investing the same amount on a regular basis. We have seen that Japanese investors are disciplined in putting in a certain amount of funds to save even during a crisis, ” Matthew pointed out. The robo-advisory market in Japan is estimated to be around US$5bil at the end of 2019.

In the pipeline, Tan said MyTheo is studying market needs and is looking to introduce portfolios that are syariah-compliant.

Given the low interest-rate regime and uncertainties in the global market, Tan advised investors to practice diversification of portfolio and dollar-cost averaging via a regular savings plan as well as take a long-term view on investments.

“Stay invested for at least three to five years to reap long-term benefits, stay within your risk appetite and do not lose sleep or be fearful during market dips and let a digital investment management service help you, ” he said.

As cyber security risk is inherent, Fintech Association of Malaysia president Mohammad Ridzuan Abdul Aziz said cyber risk is an ongoing threat that needed to be tackled and is a responsibility of all stakeholders including investors, funds manager and regulators.

Currently, the Securities Commission has granted licences to three robo-advisers in the country – MyTheo, StashAway and Wahed Invest. Rizduan expects two more robo-advisers to be licensed this year.