The CEO of Exo Investing, Lennart Assholf, looks at how investment-based technology is rapidly changing through an article on What Investment.
Over the past decade, tech companies like Amazon, Spotify, and Netflix have taken the lead in the shift from face-to-face to digital. Further improvement/advancement could see technology outperforming human capabilities completely. Furthermore, the use of artificial intelligence and data has allowed robots to create original novels, cut out tumors and recreate Van Gogh’s brush strokes.
In the financial services industry, the shift towards digital platforms has accelerated dramatically over the past five years. In fact, it feels as if new robo-advisors are being developed on a weekly basis. Whereas some are built based the expertise of fund managers, more of them depend on algorithmic approaches that are programmed by data scientists.
The Opportunity for Data
Exo Investing has collaborated with a purely quantitative asset management firm, as it believes in an analytical and statistical approach to investing. The company relies on algorithms that have been perfected more than three decades to use the massive amounts of existing financial data.
The highly sophisticated quantitative analysis technology backing Exo Investment has previously existed, but only to very wealthy customers and institutional investors of private banks. Running calculations each minute has always been costly. Nevertheless, the availability of cloud-based support, advancement in parallel processing and the development of machine learning has allowed Exo Investing to provide the significant advantages and enhanced investment outcomes such as individualized products to a wider audience, online.
Humans have Limits
Although data analysis has always been the foundation of fund management’s existence, the complexity, and sheer volume currently needed, goes beyond the capability of humans. It is impossible for human beings to undertake thousands of computations in a split second. However, you can teach machines to do that perfectly.
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Although humans are capable of carrying out a thorough analysis of the market environment, their plans, outlooks and financial situation for the future, it can be impossible to do it again day after day. For machine learning, such repetitiveness tasks are not an impediment.
Humans are Prone to Emotions
Biases and emotions could interfere with the ability to make rational decisions. Personal investors and experienced fund managers are prone to this challenge.
The Changing Landscape in the Financial Space
The move towards a tech-focused and data-driven approach has already started and is expected to continue at a high rate. This situation will greatly affect the role of fund managers in the financial planning space, particularly in the future.
Man Plus Machine
For Lennart Assholf and his team, Exo Investing is a powerful combination of man and machine. The company boasts of humans who work round the clock to programme its sophisticated algorithms. It also allows its investors to focus on specific investment fields like technology, healthcare, and energy.
Thanks to its purely data-driven approach, Exo merges risk control, technology, and investment uniquely in a bid to make individual investing accessible to all its stakeholders.