Reducing risk with artificial intelligence

Investors can no longer ignore the impact of Artificial Intelligence (AI) on investments. AI is here to stay.

With this in mind, the Glacier Management Company launched its first artificial intelligence (AI) fund in September 2018. As at 8 February 2021, the Glacier AI Flexible Fund of Funds (the Fund*) had over R580 million in assets under management. The Fund was launched during a volatile time in the markets, but despite market conditions at the time the Fund 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.
AI advantage 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 quicker 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.

Ideal investor
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.

Reducing risk with artificial intelligence
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