‘FOLIO ROBO PRO’, an AI-powered robo-advisor designed by AlpacaJapan with FOLIO, surpassed the turbulent 2020 caused by COVID-19, achieving a performance of approximately +13.99% for the year!

Maya Kusajima
Feb 24 · 4 min read

FOLIO ROBO PRO (hereinafter referred to as ‘ROBO PRO’) released on January 15, 2020, by AlpacaJapan Co.,Ltd. (hereinafter referred to as ‘Alpaca’) in collaboration with FOLIO Co., Ltd. (Headquarter: Chiyoda-ku Tokyo, Founder & CEO: Shinichiro Kai, hereinafter referred to as ‘FOLIO’) celebrated its 1st anniversary.

ROBO PRO is a robo-advisor that incorporates AI developed by Alpaca and actively rebalances highly liquid Global ETF into diversified investments, aiming for deeper and more accurate performance. This is a service whereby anyone can use AI to manage assets which FOLIO has been offering to individual investors since last year.

It has only been 1 year since the release of ROBO PRO, however according to FOLIO’s publication https://prtimes.jp/main/html/rd/p/000000084.000022761.html (disclosure in Japanese only) released on January 29, 2021, ROBO PRO produced about +13.99% (*1) positive returns from January 15, 2020 to January 14, 2021, whereas other common robo-advisors were about +5.51% (*2) and TOPIX was about +8.21%.

In 2020, the New Coronavirus had a major impact on the market leading to a historical crash in March due to the ‘Corona Shock’. Subsequently, however, the market recovered sharply, and experienced a turbulent year with the Dow Jones Industrial Average hitting its record high and the Nikkei Stock Average reaching its highs for the first time in about 30 years. Under such circumstances, why did ROBO PRO perform so well? This is partly due to the greatest features of ROBO PRO where it “anticipates the market and boldly changes the asset ratio”.

After the release on January 15, 2020, as of February 18, 2020, it read the market’s plunge and was able to limit the decline by lowering the holding rate of equity ETFs and raising the holding rate of bond ETFs. And at the timing of when the market hit its bottoms, it lowered the holding rate of bond ETFs and increased the holding rate of real estate ETFs enabling it to ride the wave of recovery.

It subsequently anticipated a market rally, raising the holding rate of equity ETFs. Just before the rebalancing in December 2020 and January 2021, it further increased the holding rate of equity ETFs, allowing it to perform well into the year-end and New Year rising market.

As described earlier, ROBO PRO was able to predict the future of the market based on more than 40 different types of global market data and successfully weather various situations in the market, which is why it is believed to have been able to produce such outstanding results in the past year.

Making this joint project with FOLIO a typical example, Alpaca will continue to specialize in a variety of AI technologies and expand into the robo-advisor market together with both domestic and overseas financial institutions. Please do contact us if you are interested.

※1 FOLIO ROBO PRO performance

This is the performance if you had invested in the FOLIO ROBO PRO service from the release of the service (January 15, 2020) through January 14, 2021. Investment management fees are collected at an annual rate of 1% (excluding tax), and calculation is done assuming that rebalancing was done with no deviation from the optimal portfolio. Dividends are automatically incorporated into investment contributions and are calculated assuming reinvestment through rebalancing. Taxes on dividends and capital gains at the time of rebalancing are not taken into account. Numbers are rounded down to the third decimal place.

※2 About common robo-advisors

“common robo-advisors” used as comparison, calculate the outcome of managing the same ETFs as ROBO PRO does by applying common investment algorithms. Common investment algorithms are based on the Nobel Prize-winning theory and adopt the mean-variance method widely used by financial institutions. The expected returns in the mean-variance method are calculated using CAPM, with a slightly higher risk tolerance and a 5% to 40% holding ratio limit to calculate the optimal portfolio. In the simulation of “common robo-advisors,” FOLIO also collects investment management fees at an annual rate of 1% (excluding tax) and calculates assuming that rebalancing was done with no deviation from the optimal portfolio. Dividends are automatically incorporated into investment contributions and are calculated assuming reinvestment through rebalancing. Numbers are rounded down to the third decimal place.

These results are of the past and are not intended to suggest or guarantee future investment performance. Percentages shown in the text are not annual rates. Calculations are in yen and are based on (the asset valuation/the initial investment amount) -1.

Calculations are based on information that is believed to be reliable but we do not guarantee the accuracy or completeness, etc. of the information.

alpaca.ai

AlpacaJapan Co., Ltd.

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