Introducing AMPs: How AI can help you manage public market investments
April 25, 2023
Artificial Intelligence (AI) is taking the world by storm this year, thanks to applications like OpenAI's ChatGPT. But AI's potential to change our lives extends far beyond Large Language Models (LLM) and chatbots.
Rapid advances in AI have made it possible to unlock sophisticated investment strategies that were previously only available to the savviest and wealthiest investors. To help more people level-up their public market investments, Arta has launched AI-Managed Portfolios – or what we call AMPs.
- AMPs use AI and Machine Learning (ML) to bring sophisticated financial techniques, previously available only to the ultra-wealthy, to more investors.
- Designed by technology and finance experts, AMPs help manage risk systematically, seeking to reduce portfolio dips during market volatility, in order to help optimize for better long-term growth and above-market performance.
- AMPs are designed to learn from and respond to market dynamics, providing the potential benefits of an active investment strategy without needing to hire a team of quant and investment professionals.
- AMPs are designed to help meet individual preferences and goals, offering a more customized investment experience than traditional robo-advisors or ETFs. As AMPs continue to evolve, Arta’s members will be able to include factors such as overall financial position, geographic location, investment beliefs, and ethical impact.
- Arta's commitment to fair, accessible, and transparent pricing means no hidden fees, making advanced investment strategies available to a wider audience, and aligning incentives with members through performance-based pricing options. We aim to keep pricing similar to what you would see with passive investing.
What are AI-Managed Portfolios (AMPs)?
AMPs use AI and ML to help optimize public market investments by adapting to changing market conditions and responding to more data and inputs than most human investment teams ever could.
By bringing decades of peer-reviewed investment research together with cutting-edge AI & ML techniques, AMPs help deliver better risk-adjusted returns while keeping fees low and transparent. AMPs are based on time-proven financial academic research and sophisticated investment methodologies – including Modern Portfolio Theory, Factor Models, Minimum Variance Theory, and leverage. These are typically used by the most astute investors to manage the portfolios of the ultra-wealthy. Now, with the help of AI in AMPs, these techniques can be applied to individual AMPs and customized to each investor, so millions more can potentially benefit from them.
By bringing decades of peer-reviewed investment research together with cutting-edge AI & ML techniques, AMPs help deliver better risk-adjusted returns while keeping fees low and transparent.
AMPs make four key advances possible:
- Systematic risk management for enhanced performance
- Agile responsiveness to market changes
- Transparent pricing models
- Tailored personalization for individual needs
1. Systematic Risk Management for Enhanced Performance
AMPs help deliver better risk-adjusted returns with the help of AI and ML. The secret lies in how AMPs are laser focused on seeking to reduce ‘dips’ in the value of a portfolio when market volatility is high. Over time, these savings have the potential to add up and compound, which can result in better long-term growth and above-market performance.
To streamline risk management, AMPs combine systematic technology with human expertise. Starting with the investor's declared risk tolerance, AMPs will model risk across various factors, such as sector and geographic exposure, interest rates, currency, and technical factors like momentum and reversal. Human risk experts provide an additional layer of risk mitigation, helping improve resilience against black swan-like events.
2. Agile Responsiveness to Market Changes
Managing investments day-in, day-out is a daunting task for most people. AMPs are designed to respond to and learn from market dynamics and are trained on vast financial data sets – so you can reap the benefits of an active investment strategy without the hassle of constant oversight. Arta's proprietary AI models constantly evaluate their own level of confidence, learning and improving over time to help deliver precise, performance-driven portfolio management.
In the face of fluctuating interest rates, evolving political landscapes, unpredictable earnings releases, or shifting index movements, even the most astute investors rely on teams of experts to fine-tune their strategies. But unlike human teams, AI doesn't need to rest, helping your investments stay on course 24/7 no matter what the world throws at them.
3. Transparent Pricing Models
Arta's commitment to transparent, fair, and accessible pricing means no hidden fees, making sophisticated investing available to a wider audience. And building AMPs using AI and tech enables Arta to offer the choice of performance based pricing for qualifying members. For example for the Grow [1x] AMP these members will be able to choose between 0.40% of AUM, 10% of gains, or a combination of the two - 0.20% of AUM + 5% of gains. This helps us align our incentives even more tightly with those of our members.
4. Tailored Personalization for Individual Investors
In contrast to the one-size-fits-all approach of traditional robo-advisors or ETFs, we’re designing AMPs to help meet every individual's preferences, goals, and financial situation. When you buy an AMP, you own the underlying investments1 - unlike mutual funds and ETFs where you may be in a commingled fund.
Soon, every Arta member will be able to build an AMP that’s unique to them. An AMP will take into account factors such as risk appetite, sector concentration, geographic exposure, investment beliefs, and ethical impact. As personalization expands, AMPs will increasingly take into account elements like overall financial position, geographic location, and more to deliver a comprehensive investment strategy.
AI has the potential to transform finance, empowering all of us to better manage our money and build towards our goals. AMPs, driven by AI and ML, bring sophisticated portfolio management techniques within reach of a broader audience. With AI-Managed Portfolios, you can take advantage of cutting-edge technology designed by the best in computer science and finance to enhance your public market investments. We’re incredibly excited to share this technology with you.
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Underlying investments are held in separate accounts in each member's name, with Arta's broker-dealer and custodian BNY Mellon | Pershing.↩