It's been eight years since Kelvin Lei Chunran tapped into the financial sector. In 2015, a banner year for financial technology (fintech), Lei quit his job at Deutsche Bank and jumped onto the bandwagon.

Fintech has been developing rapidly since 2014 - the investment funding plowed into the sector has almost tripled from 2013 - according to reports by KPMG and CB Insight.

But, Lei notes that Hong Kong's technology function in financial institutions has not been keeping pace with the overall enhancement. The information technology departments of many banks are still inconspicuous and they could not initiate product development.

He sees digital financing is an irreversible trend, believing that artificial intelligence could do something for investment activities.

The idea of a robo-adviser, known as the AlphaGo in the investment world, inspired Lei. It might be something new in Hong Kong, but it has been familiar to Wall Street for 10 years. The digital wealth management service selects personalized investments automatically and builds diversified portfolios with AI.

"I was thinking of integrating algorithms and technology to add more value to the financial world," says Lei, founder and chief executive officer of Hong Kong-based Magnum Research.

However, the former investment banker had little idea about algorithms. It reminded him of an ideal partner - an ex-colleague Don Huang Yao-tung, who holds a doctorate in mathematics from Hong Kong University of Science and Technology.

Huang was impressed by Lei's idea and found it was related to his research areas. He used to build mathematical models for investment problems and resolve them with an engineering approach. He thought the robo-adviser could make a fundamental change for society, and joined the team as head of quantitative research and co-founder.

With help from HKUST, the duo was offered an office on the campus. Their brainchild AQUMON - formed by the combination of accurately and monitor - came into being in September 2016.

"You can think of the algorithm as its brain, and the IT infrastructure as its body," Huang says when describing AQUMON.

The company's business started through cooperating with various financial institutions, including banks, securities companies and insurance enterprises. Using underlying funds requested by these institutes, the duo and their team helped company clients develop a robo-advisory platform and an automatic placement system to improve efficiency and save costs.

"We've now teamed up with more than 30 financial institutes at home and abroad," reveals Lei. "Our focus in future will be on retail customers. What we always want to do is to bring financial services to ordinary citizens."

Although Hong Kong is an international financial center, expert opinions on investment are only available for super-rich clients.

According to a report by Private Wealth Management Association and PwC last year, the number of people with net assets of $1 million or above stood at about 250,000. It means nearly 95 percent Hong Kong residents have no access to professional investment advice on the global market, taking into account the city's population of around 7.4 million.

Magnum Research got two licenses from the Securities and Futures Commission, the city's statutory regulator, at the end of 2016, including a Type-1 license to deal in securities and a Type-4 license to advise on securities-related business. It made the company a pioneer in the robo-advisory service market in Hong Kong, and allowed them to serve retail investors.

AQUMON could pick Hong Kong ETFs (exchange-traded funds) selectively for its data center using data science. Based on retail investors' risk appetite, it will create a portfolio of several ETFs to invest in global stocks, debts and other investment products, says Huang.

A plan to launch a new robo-advisory platform for Chinese mainland clients is on the agenda. It will enable more people to have a chance to invest in the United States stock market.

"The new engine will cover 4,000 ETFs in the US market, while AQUMON could only cover 200 ETFs in the Hong Kong market, according to the regulation issued by the SFC," Lei explains. "We want to be one of the largest players in the robo-adviser sector on the mainland."

The company completed its Series A round funding led by Alibaba Entrepreneurs Fund last year and is plotting a Series B round at the end of this year, Huang says.

The Asia-Pacific region, including the Chinese mainland, Hong Kong and Singapore, is highlighted as hot markets for robo-advisers by data firm IDC. It sees the combined total assets under management on robo-advisory reaching $500 billion by 2021.

The market in Hong Kong tends to have more players, with the appearance of "Chole" by social trading startup 8 Securities, as well as Youyu Robo Advisor under Alibaba Group-backed Yunfeng Financial Group.

According to Lei, each company's DNA is different when created. 8 Securities was built as an electronic trading platform originally and the function of robo-adviser was added later, while Youyu Robo Advisor is using mutual funds.

"The market is still fairly large. An explosive boom is possible in three to five years," says Lei.

edithlu@chinadailyhk.com

(HK Edition 07/13/2018 page8)