By Chee Jo-Ey

IT is reported that less than 5% of retail investors on the local bourse are under the age of 35. Getting started in investment can be especially difficult for young millennials with limited funds. You need to have hundreds of thousands of ringgit before any fund manager would be willing to advise you on your investment issues.

What’s more, Malaysians have long been known to have the tendency to hold back on the investing front and would much rather keep their stash in their pockets. But digital innovation has changed the investment scene in recent years. There are now more investment tools that require less entry costs such as the trendy robo-advisor.

Can you entrust your money to a robot?

Many might think the term robo-advisor sounds futuristic but GAX MD Sdn Bhd CEO and managing director Ronnie Tan Tai Ngee prefers to use the term digital investment management (DIM) services.

GAX MD brings together the collaborative effort and expertise of a tech firm and investment fund managers to give birth to MYTHEO, a digital investment management service that handles the A to Z of investing for its users.

“To me, the word robo-advisor gives the impression that everything is managed by a cold black box but that’s not entirely true in our case. We use a lot of artificial intelligence (AI) too but there’s also a lot of input coming from a team of professionals,” Tan explains.

Digital investment management incorporates technology in the creation of an algorithm along with the input of professional fund managers to manage a pool of asset classes or portfolios that are designed according to factors like risk appetite, income, investment horizons and so forth.

GAX MD is a joint venture formed in September 2018 by Silverlake Group and a Japanese-based company by the name of Money Design.

The fintech company is regulated by Securities Commission Malaysia.

Silverlake Group is a software organisation focused on financial technology while Money Design is one of the pioneers of robo-advisory services in Japan “so we form this joint venture to provide robo-advisory services”, says Tan.

Money Design’s team comprises former employees of investment giants like US-based Blackrock Inc, Japan-based Nomura Holdings, Inc as well as academicians from Kyoto University who all played a part in building the algorithm.

GAX MD conducted a lot of backtesting that started back in 2006.  

Backtesting is the general method for seeing how well a strategy or model would have done ex-post. It assesses the viability of a trading strategy by finding out how it would play out using historical data.

“We simulated the Lehman Brothers financial crisis in 2008 to see how MyTheo would perform in that situation which is made available in our app. We also do projections of how your investments might turn out in the next 10 years.

“We have a group of experts that monitor for abrupt cases and make a decision if it needs fine tuning. But we do not interfere with the algorithm every day because that would be timing the market. MYTHEO is not for instant gratification but encourages long-term investment,” says Tan.

The good thing about the robo-advisor is it is logic-based and operates without any emotional attachment so it eliminates investor bias tendencies. The new technology increases efficiency, allowing it to analyse big data in an effective manner but there’s a human element to it as well.

Investor awareness a challenge

Digital asset management is still considered a new instrument so there needs to be more awareness and education.

“We are working very closely with authorities and all relevant parties like universities and private entities to promote financial literacy aggressively. A platform like MYTHEO makes it really affordable for everybody to invest and save for their future,” Tan notes.

There is an interesting story behind the name of the product. Theo is the brother of Vincent Van Gogh who handled all the artist’s financial dealings so he could focus on his art and passion without a worry.

“Our product is called MYTHEO. We want to be a Theo to young millennials and underserved investors so that they can continue to live their day-to-day life and leave the nitty gritty of investment to us,” he adds.

According to Tan, close to 70% of users on My Theo are millennials aged between 25 and 38 and this could be due to its mobility and an uncomplicated onboarding process that takes only five minutes.  

Tan paints a picture of how things go on its platform. “For instance, if you would like to invest RM500 on our platform, we’ll first profile you with just five questions and according to your profile, help you invest your money into instruments called exchange traded funds (ETFs). They are like unit trust funds but traded on the stock exchange.”

An ETF is a collection of securities – such as stock – that often tracks an underlying index, although they can invest in any number of industry sectors or use various strategies.

The platform’s funds are invested in stocks on the New York Stock Exchange (NYSE) and Nasdaq Stock Market. There are three functional portfolios on the platform which are growth, income and inflation hedge. Growth stocks are for those looking for capital gains. The income portfolio looks at bonds while the inflation hedge portfolio focuses on commodities like gold and oil that can help balance investors’ assets in an economic downturn.

“If you’re a younger investor with a long investment horizon, a higher percentage would go into the growth portfolio. So, it really depends on your profile and each investor has his or her own portfolio that is created automatically,” Tan says.

One can start with RM100

Robo-advisory services often invest only in ETFs because they cover a wide spectrum of asset classes and are more affordable.

MYTHEO invests in about 59 ETFs that are segregated into three functional portfolios. These ETFs cover more than 10,000 listed companies, among whom are global companies across major countries like the US, Japan, Hong Kong, and Australia to ensure diversification.

“To encourage people to try MYTHEO, we’re having a promotion currently whereby investors can invest through our product with only RM100,” says Tan.

MYTHEO charges investors an annual management fee of between 0.5% and 1% of their assets under management (AUM).

For those who want to have more of their own say, MYTHEO allows them to take control by offering two modes – omakase whereby the platform prepares the investment menu for investors and ala carte which takes into account investors’ input.

For example, investors starting off with RM1,000 can choose to allocate RM600 for MYTHEO to invest while the rest goes into the portfolio of the investors’ choice. All portfolios will still be managed by the platform. – March 13, 2020

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