In March 2017 our team came up with the idea to regularly contrast performance of several robotIQ portfolios with the performance results of Germany’s major commercially available robo-advice offerings. Conveniently, the renowned financial news website “Brokervergleich” was already running a monthly comparison, hence we just hooked up on their regular updates, acquired their analysis setup and added the realized performance of our robotIQ portfolios.
For credibility reasons and to create an unalterable track record, we setup all partaking robotIQ portfolios on the Wikifolio platform. Persephone staff took on the responsibility to timely mimic any real portfolio transactions on Wikifolio.
Model wise we decided to use a “dynamic target risk” asset management approach to control the portfolios. This approach uses the investors’ risk appetite as key parameter on which assets are managed: algorithms construct, monitor and optimize portfolios as to maintain the portfolio risk within a given risk corridor favored by the investor.
The choice of this asset management model has been mainly inspired by a preceding Persephone project, in which we not only developed the greenfield concept for Deutsche Bank’s robo-advice offering “ROBIN”, but additionally validated the models with the authorities and finally managed implementation and go-to-market. Before we went life with our setup, however, the models developed for ROBIN, which implement such a sophisticated risk targeting approach, have been significantly extended and revised. E.g., our robotIQ portfolios allow for investments in bitcoin and hedging and/ or leveraging through options and futures. Additionally, we included arbitrary asset class constraints or comprehensive ESG requirements which could be required by investors. Due to either regulatory restrictions or complexity concerns neither Deutsche Bank nor any other provider of commercial robo-advisory solutions offers such features today.
After the portfolios were setup in April 2018, we experienced exiting and insightful times. We had months, in which we couldn’t await the next Brokervergleich comparison update to add and to interpret the robotIQ portfolios’ performance. In other months, we knew in advance that robotIQ probably would not keep up with many of the commercial offerings. We struggled with data quality issues, suddenly discontinued warrant pricings, uncommunicated ISIN switches and many other, quite individual incidents – not least due to the Wikifolio platform. Some of our problems were also self-made, such as erroneously bought or sold securities. However, most issues can be attributed to the added complexity through extended asset classes and new instruments.
Learnings and excitement came at a price, too. Running the portfolios, keeping up with transaction recommendations not only on the Wikifolio platform, calculating the comparisons and writing update briefings has been taking quite some efforts. After little more than one full year cycle of monthly comparisons, we therefore decided to continue with a significantly lower intensity. Instead of closing down the entire setup, we will keep on publishing selected robotIQ portfolios on Wikifolio, but at the same time we will refrain from compiling monthly comparisons. You may, however, expect an update every now and then.
Having said this, let us take a closer look at the comparisons of the current – and until further notice last – performance analysis for June 2019.