Investors can no longer ignore the impact of artificial intelligence (AI) on investments. AI is here to stay.
With this in mind, the Glacier Manco launched its first artificial intelligence (AI) fund in September 2018. The Glacier AI Flexible Fund of Funds (the Fund)* recently celebrated its second anniversary with over R580 million in assets under management (as at 8 February 2021). The Fund was launched during a volatile time in the markets, but despite market conditions at the time the Fund has remained steady.
Machine versus market movements
The Fund was designed to reduce human emotions and respond to how the market is moving. The Fund aims to provide superior capital growth and mitigate downside risk over the medium to long term and is managed using AI and machine-learning techniques – with no human emotion or bias. This allows the Fund to actively adapt to changing markets while not being distracted by the markets, thereby reducing risk and improving outcomes for investors.
Markets are changing, moving faster and faster, and conventional ways of managing funds often can’t keep up.
In this environment, AI can enhance investment strategies by:
– Being self-learning and adaptive – the AI engine can quickly adapt to changing environments and markets and self-adjust its methods to minimise investment risk
– Being predictive – the AI engine aims to identify and predict evolving market behaviour on a systematic and objective basis
– Reducing human error and removing emotions from investment decisions.
What is artificial intelligence?
AI is the theory and development of computer systems that are able to perform tasks that normally require human intelligence, through machine-learning techniques. These systems are able to perform specific tasks better and more quickly than a human.
Adding value for investors
In just a little over two years, the Fund has already added value for its investors and has displayed the potential benefits of removing human emotion from the investment decision-making process. Despite challenging market conditions, the Fund has produced risk-adjusted returns superior to those of the JSE All-Share Index.
The Fund ticks all the boxes for investors seeking exposure to local and global stock markets to provide long-term capital growth, who have an investment horizon of five years or longer, and who are comfortable with the local and global stock market and currency risk. Although investors may experience volatility in the short term, the Fund aims to achieve a return of at least 5% above inflation over rolling three-year periods and will limit downside risk over the medium to long term.
The Fund demonstrates Glacier’s commitment to innovation, and to seeking ways to improve the investment experience for clients.
*The Fund is managed by Glacier Management Company (RF) (Pty) Ltd with portfolio management by Satrix, a division of Sanlam Investment Management (Pty) Ltd. The AI engine, PIE, is provided by Sanlam Global Investment Solutions.
Glacier Financial Solutions (Pty) Ltd and Sanlam Investment Management (Pty) Ltd, are licensed financial services providers.
Glacier Management Company (RF) (Pty) Ltd is a registered and approved Manager in Collective Investment Schemes.