Helmuth Fuchs from Moneycab interviewed aisot Co-Founder and CEO Stefan Klauser. Read the interview here (translated from German).
Moneycab: You aim to personalize portfolios on a large scale and automatically tailor investment strategies to rapidly changing markets using artificial intelligence (AI). What have been the initial experiences, which investment instruments has the solution worked with so far, and when will Swiss stocks be replicable?
Stefan Klauser: Our platform's initial users are highly satisfied with the results. The platform allows them to design, validate, and customize investment strategies with unprecedented speed and precision to meet individual needs. After unlocking the platform for Digital Assets in the first phase following its launch in October, the stock market will be introduced in December.
Moneycab: What are the main data sources you use for your models?
Stefan Klauser: We incorporate data from three different categories into our models: market data (prices, technical indicators, etc.), alternative data sources (news, social media, etc.), and macroeconomic data. We continuously combine and integrate these data sets to train our models. Additionally, we can directly incorporate data generated by our clients, such as proprietary ratings or investment recommendations, into the models.
Moneycab: Based on what criteria are the portfolios personalized?
Stefan Klauser: We allow, among other things, the selection of the investment universe down to the level of individual securities. Customers can then define specific objectives, such as a volatility target. Further customization options include capturing restrictions, such as maximum cash allocation, weighting of different assets, or maximum turnover rate. Additionally, clients can specify whether rebalancing should occur monthly, weekly, or daily. The equity portfolios offer even more opportunities for personalization, such as sector selection and ESG factors that can be individually adjusted according to "environmental," "social," and "governance" criteria.
Moneycab: In your product, in addition to the "Portfolio Builder" and the "Portfolio Rebalancer," there is also a "Product Launchpad." How does it work exactly, what products can be created with it, and where can they be traded?
Stefan Klauser: The "Product Launchpad" offers a unique opportunity to transform portfolios generated and/or optimized on the AI Insights Platform into tradable securities. Customers also have the option to delegate the asset management mandate and ensure professional management of their portfolios. This allows customers to focus on specializations, satellite portfolios, or client acquisition. Currently, strategies can be transformed into the following products: AMC, ETP/ETN, and funds. These products receive an ISIN number and are currently tradable in Switzerland and several other countries.
Moneycab: In aisot's solutions, familiar components such as Neural Networks, Machine Learning, analytical methods, and Large Language Models are utilized. You leverage data that is generally accessible and avoid "Black-Box" models. Where do you have an advantage over competitors, and what makes aisot's solution unique?
Stefan Klauser: The models employed by aisot in the AI and quant finance domains are grounded in the latest scientific advancements. For instance, our Head of Research and Development, Dr. Nino Fantulin-Antulov, often collaborates with our AI specialist, Prof. Dr. Petter Kolm, to publish scientific articles on topics such as AI in Asset Management and the utilization of publicly available data for portfolios. They are regularly acknowledged as two of the leading researchers in this field, providing aisot with a distinctive edge based on cutting-edge research and expertise. Moreover, for many clients, translating potential proprietary models into concrete real-time predictions and portfolios poses a significant technological challenge. In this regard, we have a scientific and technological advantage over our competitors.
Moneycab: What is the long-term performance of your actively managed, AI-based certificate compared to the underlying asset, such as Bitcoin or Ether?
Stefan Klauser: This product demonstrated a clear outperformance against BTC and ETH during the backtesting period since January 2021. In addition to performance, our AMC exhibits significantly better values for Sharpe and Sortino ratios, as well as for maximum drawdown and annual volatility. The AMC was first implemented in a portfolio on October 3, 2023. As of today (November 7, 2023), the portfolio is up by over 30%, showcasing an outperformance against standard benchmarks. Furthermore, we have been trading a U.S. Equity Portfolio for almost two years, demonstrating our ability to outperform major indices like the S&P 500.
Moneycab: You offer your solution as a Managed Service. Where is the solution hosted, and what does your revenue model look like (how is revenue generated)?
Stefan Klauser: We provide our solution both as a centralized platform and as decentralized Managed Services, allowing our clients to have full control over their data. While the platform solution is hosted on a Swiss cloud, we remain highly flexible in terms of hosting solutions for Managed Service clients. The revenue model is based on subscriptions for accessing the AI Insights Platform. Additionally, revenue is generated through profit-sharing from certain products, as well as income generated by our own products.
Moneycab: Up until now, you have raised 2.5 million CHF from investors. When will the next financing round take place, and what type of investors are you looking to attract?
Stefan Klauser: The next round is scheduled for around mid-2024. Similar to the seed round, it is important for us to collaborate with investors who possess a strong network in the asset and wealth management sector and can offer support beyond financial assistance. We maintain a very positive relationship with our investors, viewing them as active partners in our venture.
Moneycab: Which technological developments do you consider crucial for the financial industry in the coming years, and how do you integrate them into aisot's solutions?
Stefan Klauser: The most pressing need that the financial industry must address as quickly as possible is personalized solutions in the realm of wealth and portfolio management, as indicated by various surveys. The technology that makes personalization possible, Artificial Intelligence, will transform many facets of the financial industry in the coming years. The benefits extend far beyond improved data analysis and personalization, encompassing efficiency gains, enhanced risk management, cost reduction, and more. Given that Artificial Intelligence is the core competence of aisot, we are well-equipped for this evolution, enabling our customers to stay at the forefront of these advancements.
Moneycab: If your vision of fully automated and AI-supported investment products traded through fully automated trading platforms comes true, what exactly will people still be doing in the entire process?
Stefan Klauser: Humans will continue to play a crucial role in the process, especially in areas such as strategic investment planning, monitoring, and risk management. Human expertise will be essential for making longer-term decisions and pre-selecting investment choices. People will also be responsible for monitoring and overseeing automated systems to ensure they operate properly and align with predefined objectives. Even in a world of fully automated processes, human judgment and expertise play an indispensable role in enabling the efficiency and effectiveness of investment strategies.
Moneycab: At the end of the interview, you have two wishes. What are they?
Stefan Klauser: The first wish is on a business level: That with the aisot team, we continue to assist our clients in achieving successful, personalized, and sustainable investment strategies, allowing aisot to grow as planned. The second wish is on a societal level: Even though our products function well, especially in uncertain times, I wish for a more stable and peaceful world.
