Upside AI, a machine learning-based investment management platform is aiming for a 5-fold growth in its customer base from the current 100 by the end of 2023 by offering products that will make investment decisions easy through technology.
“Our long-term vision is to become India’s leading tech-first asset management company. We want to build products using rules and systems because we believe a systematic approach to investing is the best way to create long-term wealth,” said Kanika Agarrwal, co-founder, in an interview with ETMarkets. Edited excerpts:
Technology in the financial services sector is emerging in a big way. How is Upside AI simplifying and transforming the way of investing in markets through artificial intelligence?
Artificial intelligence and machine learning are not new concepts and have been around for decades. The top 5 hedge funds in the world are quant funds and a majority of the trading activity in the US is system driven. In India however, we are still in the early days.
Fundamentals-based investing remains the domain of humans in India, which will hopefully change over the next 5-10 years and we at Upside AI will be at the forefront of that trend.
We use machine learning because we are specifically looking for the machine to rely on objective data and eliminate human bias from investment decisions.
So, to summarize, machine learning plays two roles –
– It eliminates human bias, and
– It is able to parse and make decisions using millions of data points and iterations.
What are your unique offerings that differentiates you from other players in this segment?
We primarily manage money for high networth individuals with a minimum ticket size of Rs 50 lakh.
There we manage a few strategies – ‘Upside AI Navigator’ is an asset allocator that reads macro signals to decide how much to invest in equity, debt, and gold. The idea here is to reduce volatility while trying to beat the Nifty 50.
We also run a couple of equity strategies – ‘Upside AI 250’ for buying large/midcap stocks and ‘Upside AI Flexicap’ which is primarily a mid/smallcap product.
Apart from that, our research division publishes smallcases for retail customers where you can invest Rs 50,000. There we have three buckets of products across equities and asset allocation.
As far as other technology goes, today in India, technology is doing the basics, screeners, technical analysis, high-frequency trading, etc. But the “holy grail” is learning true investing which is the area we are focused on solving.
Differentiation from humans is clear – the use of a systemized rules-based approach to investing is not affected by bias and emotion. Further, because we use machine learning, the system is truly dynamic. It is able to learn and adapt to different market conditions and stock pick based on fundamentally good stocks and what the market thinks are good stocks.
How many active clients do you currently have and where do you want to see it by the end of 2023?
We currently manage money for about 100 customers. By the end of 2023, we see this number growing five times.
What are your expansion plans for 2023? Are you planning to bring new products?
Our focus for 2023 is to grow the Upside AI platform and bring products/managers to market that are under-rated, undiscovered, and best in class.
What kind of growth potential do you see for AI-based platform services providers in India over the next 5-10 years?
Our long-term vision is to become India’s leading tech-first asset management company. We want to build products using rules and systems because we believe a systematic approach to investing is the best way to create long-term wealth.
Over the next five years, we want to be able to reach thousands of customers who can benefit from diversification into technology in their asset allocation.
The idea is to be able to attract best-in-class talent that can keep us ahead of the curve as the country increasingly goes online and adopts technology to invest.
All products we build are with that mindset – which is why we don’t do trading, derivatives, etc but simple easy to understand products that can be accessible to a broader audience. The only difference is that today, we use machines instead of humans.
How has your PMS performed in 2022? Could you share some of the top bets in your portfolio and why?
Upside AI Navigator, our asset allocation product has surpassed our expectations. We built it to navigate volatility and it did that very well in 2022. At one point in the year, Nifty was down 15% from its peak, but the product was down just 2%. The target for Navigator is to generate NIFTY-style returns while removing volatility and it has managed to do exactly that. The top bet the Navigator made was to be aggressively out of equity for the first half of the year and then increase allocation in the second half. Our gold allocation remained above 25% throughout the year.
What are the metrics you take into consideration while building a portfolio of stocks?
Our inputs into the system are logical things any good analyst should look at to invest. Company financials – profit & loss, balance sheet, cash flow, financial ratios, valuation metrics, macro parameters.
The ingredients for picking good stocks have stayed unchanged for decades. The secret sauce is not in the inputs in how the analysis is done.
Which sectors/stocks are looking attractive from a risk-reward perspective and fundamentals and could do well in 2023?
For 2023, we expect volatility to continue. India has done better than world markets in 2022, so it is possible that there is mean reversion even if equities do well globally.
We are recommending sensible asset allocation to our clients. Having said that, in the long term, Indian equities will do well given our structural tailwinds.
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