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UPDATE: Performance of robotIQ and other German robo advisors

Persephone Team, November 2018

October brought widespread losses to equity markets as higher volatility unnerved investors who cannot rely as much anymore on monetary policy support or buy-the-dip bounce backs given the relatively high valuations after a record-long bull-market. Most indices had erased all year-to-date gains by the end of October. Following months of divergence between US and other developed market equities, this month saw a parallel drop across the board, leaving relative valuations unchanged.

As noted previously, a long-term perspective is necessary to evaluate if risky portfolios provide appropriate reward.

Persephone provides an update on the performance of portfolios managed by its platform robotIQ. Since July, these portfolios, which follow a target risk approach and range from 5-25% annual Value at Risk, are compared to other robo advice offerings which are benchmarked by brokervergeich.de [1-3].

Based on Brokervergleich’s October stats we have updated our comparison aggregating the last four months (July – October)[4].

robotiq-nov

The most recent developments threw all robo advisors into the red for the last quarter. Expectably, the low risk robotIQ portfolios (robotIQ 6% and robotIQ 9%) now occupy the top ranks as their conservative risk structure dampened the losses. Remarkably, the medium risk robotIQ 16% which is broadly comparable to the set of brokervergleich’s portfolios is also in the top tier. Persephone’s high risk standard portfolios (robotIQ 19% and robotIQ 21%) – which are generally riskier than the comparison set – realized the greatest drawdown as would be expected from constant-risk portfolios.

The portfolio containing derivatives (lever.robotIQ 21%) continues to be an outlier on a risk-basis and impressively demonstrates the potential of incorporating more sophisticated quantitative approaches into robo-advice.

The target risk approach combined with Persephone’s proprietary market view model shows how portfolio risk can be adequately modulated according to client preferences [5]. On a risk adjusted basis it performs well over the short observation period. Over a longer horizon the strengths and weaknesses of the different asset management approaches will become apparent and greater dispersions are to be expected. We will keep updating.

 

Background:

Persephone operates a quantitative finance platform robotIQ© which runs one version of its digital asset management solutions in an operational fashion to manage a range of retail portfolios. These managed portfolios are published at wikifolio.com for an objective and transparent record [6]. They are compared to several robo advice offerings in the German market, which are tested by the comparison website brokervergleich.de [1].

[1] Source: Brokervergleich, Franke-Media.net, Leipzig
[2] Please see Brokervergleich Testverfahren for a detailed description of the test approach
[3] Performance of robo-advisory offerings calculated by Brokervergleich (see above), all calculations for robotIQ© portfolios based on data from Wikifolio, Ariva, Lang & Schwarz and Persephone-own calculations
[4] robotIQ© portfolios in solid color (VaR 13, 16, 19) have risk characteristics that are similar to the ones of other robo-advice portfolios Brokervergleich has chosen for comparison
[5] Please see separate article „Economic expectations and market views in automated portfolio management

[6] Persephone Portfolios at www.wikifolio.com

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