RECAP: 2019 FOX Wealth Advisor Forum

Thematic Investing: Harnessing Artificial Intelligence and Data Science to Build the Portfolio of the Future

Presenter:
Hardeep Walia, Founder and Chief Executive Officer, Motif 

Session Description: 

The premise of thematic investing is seductively simple. Markets over the long-term are driven by earnings growth and thematic investing looks to identify long-term trends that are likely to drive disproportionate earnings growth in the future. Artificial intelligence, for example, isn’t just about the next revolution of computing. It will change everything from how we communicate, to how we commute. An aging population isn’t just going to inflate the health care industry. It will reshape everything from urbanization to unions. Figuring out how these trends play out in the global economy is a complex problem. This cutting-edge talk explained how data science and A.I. can be used to uncover the most important trends driving the economy and quantify the companies with maximum exposure to these trends, as well as explored how dynamic thematic models can be created and implemented in a portfolio. 

"Humans are creatures of concept. They like to express what they want. The hard part is figuring out how to act on that expression."
- Hardeep Walia
Key Takeaways: 

  • The new gold rush in Silicon Valley is around data sets. What are they, how do you monetize it, and who owns it? Motif thinks data will revolutionize investing. 

  • 30% percent of retail investors are millennials. There is a lot of hype about the make-up of this market, as they are educated and diverse, but also poor. We can’t overlook Gen X investors because despite the size of the millennial cohort, Gen X has more assets to invest. It is important to tailor your message/product to the market you are serving. 

  • One of the frustrations is that the investing world is focused on looking back – comparing 1-year, 5-year returns. What thematic investing does is look at things in the future that drive earnings growth. Humans come up with the ideas and the machines execute.  

  • Typically, firms do 6-8 months of research to understand a potential theme or basket of investments around a theme. Motif uses neuro-linguistic programming (NLP) and webcrawler-type technology to “suck up” all the data on a particular topic, and within two hours can articulate similar research. 

  • The data-driven approach can test human assumptions and find things that humans cannot. 90% of all data created by humanity has been created in the last two years. Only 9% of that data has been tagged by algorithms. 

  • In the future, asset managers are going to need a computer science degree in order to understand algorithms and where to find the data. Even when we build data-driven investment models, we still need humans to provide insights. It is very hard to replace human relationships and impossible to get tailored financial advice from a robo-advisor. 
     

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