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One of SE Asia's largest AMCs is combining AI with traditional strategies to transform how funds are managed.
SINGAPORE, Nov. 24, 2022 /PRNewswire/ -- By 2027, the size of global Artificial Intelligence (AI) in Asset Management Market is expected to reach USD 13.43 billion, according to Grand View Research. As one of the largest asset managers in Southeast Asia, Lion Global Investors (LGI) is future-proofing its investment strategies with a hybrid approach that combines Artificial Intelligence and fundamental investing strategies.
In early 2021, LGI established the Artificial Intelligence of Investments (AIOI) team, led by Ms Ong Ai Ling, who has many years of investment experience working at Lion Global Investors, Point 72 (Singapore) and Dymon Asia (Singapore) primarily. Ong's multi-disciplinary approach to investments has helped to integrate the hard disciplines of data science to the softer aspects of investments. She is currently supported by three data scientists.
"Essentially, we are leveraging humans' thought process in managing funds — such as how they look at certain characteristics and behaviours of stocks — and programming it into our AI to adopt a bottom-up approach and streamlining our stock selection process while leveraging on human strategy," said Ong. "Our AIOI approach stands out because our AI is not just following price action or facilitating reduced reaction times, it is also tapping into LGI's collective fund management experience."
LGI has started using AI and plans to launch innovative products by AI in the coming months. To start with, the LionGlobal Disruptive Innovation Fund (a global equities fund) will be upgraded from a smart beta fund that uses a static five-factor stock screening model to one that is driven by machine learning which can dynamically consider more than 30 factors to systematically select stocks.
Machine Learning vs Quantitative Approach
Machine learning is goal-oriented and uses large amounts of structured and unstructured data to produce a model to make reasonably accurate predictions. Machine learning can also distil additional new factors to help the model learn to achieve its goals; whereas traditional quantitative approach is solutions-oriented and finds a best fit among data points.
Unlike other AI models which only use a quantitative approach, LGI is teaching its machine learning model to identify and transform factors for input that leverages its asset managers' domain knowledge.
LGI's proprietary machine learning model processes and interprets raw data available on every company in a way that mimics how asset managers would think logically and analyse the data.
What's powerful with the AI-enhanced approach is that the machine learning model can meticulously use computation power to consider and process way more factors and information and do it faster than humans. Take the US stock market for example, a typical team of analysts would not be able to consider multi-factors for all the 5,000 stocks in the universe —at most a team of five analysts could only analyse 250 stocks. With AI and machine learning, LGI can now analyse all the stocks in the US stock index.
The AI and machine learning model can also be applied for different fund themes, sectors and countries.
"LGI is one of the front runners in the Asian region combining machine learning and fundamental investing strategies," Ong said. "Our machine learning model captures the dynamic way asset managers think about investing, while leveraging AI's ability to process and analyse vast amounts of data."
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You should read the replacement prospectus and Product Highlights Sheet of the LionGlobal Disruptive Innovation Fund (the "fund") which will be made available and may be obtained from Lion Global Investors Limited ("LGI") or any of its distributors from 1 November 2022 onwards, consider if the fund is suitable for you and seek such advice from a financial adviser if necessary, before deciding whether to invest in the fund. Applications for units in the fund must be made in the manner set out, and on forms accompanying the prospectus. The fund replacement prospectus has not been registered by the Monetary Authority of Singapore.
The fund aims to provide long-term capital growth by investing primarily in equities or equity-linked securities (including but not limited to, preference shares, real estate investment trusts and depositary receipts) of companies globally, which are potential disruptors with strong growth prospects.
Investments in our funds are not obligations of, deposits in, guaranteed or insured by LGI or any of its affiliates and are subject to investment risks including the possible loss of the principal amount invested. The performance of a fund is not guaranteed and the value of units in a fund and the income accruing to the units, if any, may rise or fall. Past performance, payout yields and payments as well as any predictions, projections, or forecasts are not necessarily indicative of the future or likely performance, payout yields and payments of a fund. Any extraordinary performance may be due to exceptional circumstances which may not be sustainable. Dividend distributions, which may be either out of income and/or capital, are not guaranteed and subject to LGI's discretion. Any such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value of the fund. Any references to specific securities are for illustration purposes and are not to be considered as recommendations to buy or sell the securities. It should not be assumed that investment in such specific securities will be profitable. There can be no assurance that any of the allocations or holdings presented will remain in the fund at the time this information is presented. Any information (which includes opinions, estimates, graphs, charts, formulae or devices) is subject to change or correction at any time without notice and is not to be relied on as advice. You are advised to conduct your own independent assessment and investigation of the relevance, accuracy, adequacy and reliability of any information or contained herein and seek professional advice on them. No warranty is given and no liability is accepted for any loss arising directly or indirectly as a result of you acting on such information. The fund may, where permitted by the prospectus, invest in financial derivative instruments for hedging purposes or for the purpose of efficient portfolio management. The Fund's net asset value may have higher volatility due to its investment policy or portfolio management techniques. LGI, its related companies, their directors and/or employees may hold units of a fund and be engaged in purchasing or selling units of a fund for themselves or their clients.
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Lim Yuin
E: LimYuin@lionglobalinvestors.com
