The future of investing

Written by: Spring IM Posted: 05/08/2022

BLCITY22_SpringIM_SimonODBLCITY22_SpringIM_CarmenTSpring IM Chief Executive Simon O’ Donoghue and Head of Investment Solutions Carmen Tyler on an investment platform for all

We live in exciting times – the evolution of technology knows no bounds. Artificial intelligence and machine learning, robotic process automation, edge computing, virtual reality and augmented reality, quantum computing and block chain… 

As we embarked on our careers in investment management, we couldn’t have dreamed of having such powerful, efficient and effective tools at our fingertips.

As technology develops rapidly, we have a unique opportunity to embrace the power of these tools to innovate and deploy the most sophisticated investment products and processes.

Through the Channel Islands’ first digital investment platform we have been able to offer cost-effective investment opportunities to all – whether clients have a little or a lot to invest.

Whether lump sum or monthly payments, Spring IM is designed for first-time and experienced investors.

Our clients are using our platform to grow their savings, build their pensions, save for their first homes and invest in their children’s futures.

From digitally setting up an account online and measuring your risk appetite, to fully bringing the digital experience with daily reporting on all assets held, Spring IM has embraced the future in more ways than one with its bionic concept of investing. 

What is systematic investing? 

Also known as algorithmic investing, data-driven or rules-based – this method of investing uses data and technology to modernise the investment process and, by design, offers cost-efficient, risk-managed portfolios with a focus on consistently delivering intended investment outcomes.

It will come as no surprise that it’s all to do with vast amounts of data. Thanks to technology and innovation, we have this vast big data universe at our fingertips and we use this to drive the investment process which aids better decision-making.

How does it work – where do we start?

Investment professionals, mathematicians and data modelling specialists come together to create computer model constructs in the form of algorithms, indicators and systems in which to collate the data, analyse it, and pull it every which way throughout the investment process. 

Fundamentally, systematic investing is based on downside risk management. There’ll be some commonality between managers adopting this approach in terms of the analysis, data sources and indicators used. However, the difference will stem from the proprietary intelligence used throughout the process. 

At Spring IM, we use a wide range of highly developed and sophisticated proprietary ‘tools’ throughout our entire investment process, setting us apart.

BLCITY22_SpringIM illoWhat is Spring IM? A bionic approach

At Spring IM, we’ve expanded on a purely systematic approach and applied a human interface to deliver a refreshingly simple way to invest in the markets through an intelligent digital investment platform. 

We recognise that in order to innovate and develop on existing concepts we must also call on the skill of humans, drawing on the experience, talent and knowledge of our professional investment team to complement the data-driven approach.

But how do we use the data?

The concept of behaviour is key to our process – we use behaviour to categorise everything from the market itself, to each individual asset.

The behaviour of the market is categorised into what we call regimes, whether it’s a low, medium or high-volatility regime. Within that, each asset that we analyse in our asset universe is also categorised in terms of its behaviour within each of those regimes – not just in terms of performance, but also what they bring to the portfolio. Is it a diversifier? Is it there for alpha, beta, and so forth. 

Our indicators highlight anomalies such as an anomalous change in behaviour or a change in regime. 

The system will continuously run the data to make sure the current composition of the portfolio is optimal for the prevailing market conditions.

As our investment process is built on a mathematical framework, this allows for each step in the process to be repeatable and identifiable. Each asset in the portfolio has a clear and identifiable reason for selection. It lends itself to scalability through efficiency, which leads to cost savings that can be passed on to clients. 

Why don’t we take the traditional investment management route?

Under a traditional approach, managers are people, people are human and humans simply don’t have the capacity to perform calculations and continuous analysis like a computer can. 

In addition, being human, we are susceptible to emotional biases. Herd mentality is one example of emotional bias – some may refer to this as FOMO investing or fear of missing out. What the systematic method attempts to do is remove these human biases by taking the emotion out of investing. 

Using technology, we increase the efficiency of decision-making, leading to better risk management through avoidance of bad decisions.

How are our portfolios created? 

We take an unconstrained approach. We do not use a static framework of 60/40 equity to bonds, for example, particularly given the level of correlation between the two asset classes we’re currently seeing. Bonds no longer offer a hedge, partial or otherwise when shares fall.

And gilts, previously thought of as a safe-haven, fell more than 10% at the start of 2022, the biggest fall in 30 years.

Our portfolios are model driven and are made up of highly liquid funds and ETFs. Assets are allocated at the portfolio engineering stage. 

The model constructs select the appropriate blend of strategies and exposures to achieve the optimum level of diversification and targeted risk adjusted returns for our entire portfolio range. 

• This advertising feature was first published in the City Edition of Businesslife magazine in August 2022

ABOUT THE AUTHORS

Simon O’Donoghue 
Simon’s industry experience spans more than 30 years, during which time he has developed three international funds businesses, raised more than £3bn in assets and is the founding member and Chairman of the Channel Islands Wealth Management Association.
Email: simon@spring-im.com

Carmen Tyler 
Carmen is an experienced portfolio analyst. She is responsible for the investment solutions offered by Spring IM and is a member of the investment committee. 
Email: carmen@spring-im.com

For more information visit www.spring-im.com
Spring IM is licensed and regulated by the Jersey Financial Services Commission to conduct Investment Business under the Financial Services (Jersey) Law 1998.

 


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