smartwealth logo
cross close


RESEARCH07 July 2022

Artificial intelligence in asset management - does it work?

5 minute readsmartwealth scroll down icon
smartwealth blog hero image

Martin Velten


07 July 2022




smartwealth blog main image

Artificial intelligence is entering more and more areas of our live. Streaming services, social networks and even our vehicles use AI-based calculations to make our live more comfortable. Does this also work in asset management?

Artificial intelligence in asset management - does it work?

The development of artificial intelligence has received an incredible boost in recent years. Many digital processes are already partly based on the results of self-learning algorithms. Search engines guess which terms we will search for, our vehicles monitor the environment with sensors and brake independently if necessary, and streaming services present films, series and music based on the preferences of their users. Can self-learning algorithms also be used in wealth management? We at Smart Wealth have been working successfully with artificial intelligence in wealth management for more than 20 years and know that it works. We will show you how your assets can optimally benefit from it, by minimizing the risk within your portfolio and thus providing you with better returns.

Complexity explained simply - this is how our algorithms work

Artificial intelligence in asset management is particularly valuable when the results of the machine learning algorithms exceed the usual returns of a conventional strategy or benchmark. It is important to know that, according to scientific studies, around 75% of the returns on the global capital markets can be predicted from macroeconomic and fundamental data. Our technology with machine learning algorithms starts there and works with a multi-stage process, which we would like to present to you in more detail. Our AI-powered strategies have achieved excess returns of up to 17.40% compared to the benchmark across all portfolios for more than 18 years.

In the first step, our technology automatically processes financial market data with artificial intelligence. Thanks to its high computing power, our technology calculates many different scenarios and creates forecast models for each individual instrument.

We then determine how high the maximum risk should be and which maximum limits for losses should apply for each strategy. In the next step, the genetic portfolio optimization takes place based on the determined data of the individual market forecasts. Our technology determines the optimal balance of your assets through several million calculations and thus ensures that your investment is made with the best possible risk-return ratio.The results of the genetic optimization flow into a fully automated order execution system which creates the desired strategic composition of the portfolio in the short term and continuously monitors the execution of the transactions.

Our technology generates automated daily reports of the performance of your investments which you can access any time. 

Fully scalable portfolio optimisation –this is no problem for Smart Wealth

Our technology is fully scalable. You specify your desired investment parameters (initial investment, target return, time horizon) and our AI-Technology determines the optimal portfolio based on your requirements. The artificial intelligence can process much more information than a human portfolio manager would ever be able to calculate. Thus the self-learning technology is constantly learning and evolving.

Can the success of artificial intelligence be measured?

The success of an investment strategy can be measured. There are various key figures for this, two of which are mentioned here as examples. Compared to conventional asset management approaches in the financial industry, we achieve up to 60% lower "maximum drawdowns" with our strategies compared to the benchmark. This key figure quantifies the maximum loss in value of an investment over a fixed period of time. The lower this value, the safer the investment.

The second relevant indicator that can be used to measure the success of an investment is the so-called "sharpe ratio". This expresses the return of an investment in relation to its volatility. Values greater than 0.50 are already considers to be very good. At Smart Wealth, we achieve a sharpe ratio of 1.00 to 1.39 on average with our products.

Compared to conventional investment strategies, our technology can achieve better results. We will be happy to inform you about further advantages of the use of artificial intelligence in asset management.