US robo advisor eyes Asia

Marketriders, a US robo advisor recently acquired by broker Sogotrade, has its sights on the China market, though strict capital controls are an obstacle, said Sogotrade CEO Jonathan Yao.

Sogotrade is a St. Louis-based online broker that provides service in both Chinese and English. About 15% of clients are from Asia, including China, Hong Kong, Taiwan, Singapore, as well as Australia, he told FSA.
The brokerage recently introduced Marketriders, a robo advisory service, that open for foreign investors. The Marketriders portfolio is fully automated and can construct at least 18 various portfolios according to risk profiles and user preferences.
The portfolios contain roughly 8-12 ETFs listed in the US across stocks, bonds, REITs and commodities. A yearly fee between 0.25-0.45% is charged based on size of investments, with minimum threshold of $1,000. The portfolio is rebalanced as significant market changes occur, he added.

Marketriders targets the middle class with annual income between $50,000-$500,000, Yao noted. Although the US is considered a more mature and developed market for robo advisors, Yao hopes the robo advisor can provide an easy way for investors in Asia to diversify globally. “As the US dollar continues to strengthen and interest rates are expected to go higher in the next few years, investors might be interested in going long [US dollar assets] to capture the currency appreciation.”

Toumi RA, a robo advisor launched by Creditease Wealth Management in onshore China last year, also uses US-listed ETFs as instruments for portfolio construction.  Capital controls Marketriders is aiming to introduce the service in Hong Kong first, Yao said. The firm is not looking to actively promote the robo advisor in China at the moment amid tighter capital controls. “China’s capital market is still not fully opened and it has an impact on [our development there].” The Chinese government grants individuals a foreign exchange quota of $50,000 a year, but since the beginning of the year more detailed documentation about how the individual will use the foreign capital is required. Chinese authorities are clamping down on capital leaving the country in order to have some control over the declining value of the RMB versus the US dollar.  Research firm Cerulli Associates expected robo advisors will manage $489bn of assets in 2020 globally, from $70bn as of September 2016, and $18.7bn in 2015.