At times of high financial volatility, Korean fintech firm Fint’s artificial intelligence-powered investment service designed for minimizing risk can play its part, said an executive from the startup behind the service.
Launched by startup December & Co. in 2019, Fint is a digital version of a fund manager that implements an investment strategy and manages the portfolio through trading activities in global exchange-traded funds based on its AI engine named ISAAC.
"The service highly focuses on minimizing risks in investment," said Kim Il-hee, head of the portfolio development division at the startup, during an interview with The Korea Herald in southern Seoul on Jan. 31.
Kim is the brains behind Fint, having developed the engine named after ISAAC Newton in 2019. Kim earned his Ph.D. in discrete mathematics -- math for computer science -- at Princeton University, after graduating from KAIST.
Though a major misconception associated with AI-powered investment is that AI engines always make superior decisions, better than fund managers or investment gurus, the investment is more about making long-term investment decisions to minimize risk, Kim stressed.
“The Korean market has a high expectation on return rates. People expect a double-digit rate of return in a year -- which is simply impossible,” Kim said.
According to financial data provider Koscom, Fint showed annualized holding period return rates ranging between 3.74 percent to 9.11 percent depending on the portfolio since the launch. The return rate fell to the minus range in the past year, with stock markets experiencing a fall.
For Fint, however, it is more about the risk management.
“The investment decision is not AI's black box logic, but rather based on passive investing strategies that allocate the investment in diverse assets,” Kim said. “There are many measures for gauging the quality of a discretionary investment, such as risk management and allocation of assets. It’s not just about the profitability.”
While there are some 2,000 businesses offering wealth management and discretionary investment in Korea, Fint says it has the edge with its module-based decision-making process.
ISAAC is a group of AI modules that separately make investment decisions.
“Humans first define the problem, analyze what the nature of this problem is and decide on which data to look into. Then, we move on to what kind of methodology should be taken to solve this problem. Sometimes simple machine learning is enough, other times deep learning is required,” Kim said.
AI technology can be categorized into artificial general intelligence and artificial narrow intelligence -- in other words, strong AI and weak AI.
Strong AI means the module can think for itself, like humans do. However, it is yet to be demonstrated by human technology. Weak AI, like ISAAC, can be trained to perform specific tasks.
“For investment, there is more than just one problem to solve. An AI module cannot always give good answers to every question. Therefore, we, the humans, narrow down the big question into multiple questions and use different modules to solve them,” Kim said.
To use Fint’s discretionary investment service, a customer has to deposit the minimum amount of 200,000 won ($160), a rather low bar compared to the 1 billion won often suggested in traditional financial circles.
With the small sum for its minimum deposit, the service is especially being actively used by younger people.
Of the some 900,000 customers who have signed up for the service so far, with an average investment of 3 million won, 38 percent are in their 20s, followed by 21 percent each for those in their 30s and 40s.
Though 80 percent of users had been those in their 20s or 30s, it saw a major increase of users in their 40s after teaming up with KB Securities’ mobile trading system in November.
Of course, raising the bar to 300,000 won would be better in terms of the firm’s assets under management, Kim said. But Fint is a platform service that hopes to build a long-term relationship with its customers.
"We rather hope to lower the bar if we could. Fint is platform service which hopes to be a long-term partner in investment. Forging relationships with customers would be our priority," Kim said.