Farringdon Group’s robo adviser, ALGEBRA, plans to buy stocks based on newly on-boarded neural network technology starting this November.The Malaysia-based company will use neural network technology developed by Californian start-up Maxsys AI to invest in a portfolio of 20-50 stocks from the shariah-compliant universe of the S&P 500 index. There are approximately 125 stocks on the index that fit Islamic principles. ‘We can use it for any asset class but the neural net has to learn, like a person. So we have to start it off slow and steady,’ Martin Young, CEO of Farringdon Asset Management told Citywire Asia.The machine-learning algorithm will process millions of data points from news flow, stock volumes and other market data to recommend a stock. Two portfolio managers based in Malaysia will then take the final call on relaying the recommendation to the end-client.Since its launch in July, ALGEBRA has amassed $1 million in net inflows from private clients in the UAE, Indonesia and India, said Young. It was initially investing based on a smart beta algorithm. The neural network algorithm will run concurrently with the smart beta-based coding and clients will decide how they want their account to be managed. Currently, most robo advisors worldwide only invest in exchange traded funds because of regulatory and technological limitations. ‘Building a portfolio of ETFs is easy but stock-picking is a bigger task. Being able to handle this amount of data has taken a lot of time to develop,’ Young said.For instance, the algorithm will capture sentiment based on negative and positive news flow from media reports and social media.‘There are 10,000 pieces of news on Apple on a given day, for example, and the algorithm will check how much was positive and negative. ‘It looks at all the data at the same time and if it can accurately assess if that’s positive or negative, then with a lot of big numbers, it can give us insight that a human can’t generate this quickly,’ he added. Young is also well-aware of the concerns surrounding the effectiveness of artificial intelligence and machine learning.He said, ‘Obviously for clients, because it is new, concerns are about what is this going to run off and do, but it’s not doing any high frequency trading and you still have a human being taking the action at the end.’
Malaysia-based robo-adviser ALGEBRA is set to use artificial intelligence to buy stocks on the S&P 500 which comply with Shariah law. Roughly 125 stocks on the index meet the criteria. The firm will use software provided by California-based Maxsys AI to select between 20 and 50 stocks for its portfolio. “ALGEBRA’s technology can be used in a variety of ways, including as an investment advisor or even as a stock picker,” said Almir Al Hameedi, managing director at ALGE@@