How did each robo-advisor handle the market dip, and what steps did you guys take to adjust to the situation?

kristal.AI believes in an asset allocation approach along with a keen eye on risk metrics which we pull in via the volatility inputs we obtain from the market. In March end our asset allocation algorithms did go more conservative to increase fixed income and gold allocations. The portfolios following this approach differ from other thematic portfolios like All Weather which maintain a balanced allocation across multiple asset classes.

The benefit of a more dynamic approach is that it prevents drawdowns i.e the max loss a portfolio can suffer so one can actually have more firpower to get into the market when markets have either calmed down or at an extreme oversold level. This approach is very similar to how big institutions and funds manage billions of dollars. When markets are crashing, there is not much merit in just hoping and praying everything will be ok. One has to take a risk based approach in a sensible manner so a portfolio has enough firepower to buy when one wants to.

Also for our accredited investors we proactively put hedges in place that can prevent huge drawdowns following a portfolio insurance approach.

Our algos have been back tested in 2008-09 period and March 2020 was a real time validation we got from the market as our approach was able to limit the losses while continue to participate in the upside as markets recovered. So in short I would say having a passive portfolio with some element of risk based asset allocation works best I would recommed to everyone to follow. #trustthealgo

Hi there,

Great question! I'll leave Michele to explain this more on the show but really quickly:

There are a few reasons we have not decided to re-optimise as of yet. The S&P 500's drop of more than 20% from February 19 to March 12 was its steepest or fastest-ever fall from an all-time high to a bear market.

What has ERAA done? (here is an excerpt from our latest CIO newsletter):

"At StashAway, our fundamental principle has always been to keep our clients’ investments prepared for market and economic adversities. First, ERAA® estimates and budgets for extreme risk based on top stress scenarios in history, such as the 2008 Financial Crisis. Then, rather than predicting and reacting to future events, ERAA® builds into your portfolio mechanisms to manage your risk. Mechanisms include allocating a portion of your portfolio to funding currencies, such as the US Dollar and Japanese Yen. These risk measures, amongst others embedded in our investment strategy, have helped reduce the impact of the 2020 black swans on your portfolio.

In addition to managing your risk, our asset allocation strategy determined by our investment framework, ERAA®, ultimately enables your investments to capture opportunities in any economic environment.

Back in mid-August 2019, ERAA® switched to an “All-Weather” strategy for assets exposed to global non-US economies and increased USD exposure in the global portfolios. While our US exposure is still tilted towards growth, using data-driven analysis, ERAA® has been optimised to stay invested as the markets have already priced in the economic impact of COVID-19, the oil crash, and the policy bazookas. What drives the overall stock market is how aggregate economic stimuli stack up against aggregate output. ERAA® continues to analyse new data as they come in, looking at both how the economy shapes up as the COVID-19 crisis unfolds, as well as how the markets react, and what they do price in."

You can read the full article here: https://www.stashaway.sg/r/using-market-data-to....​​​