Considering the recent trend towards digitization, using machines for investing is no surprise, is it? But it certainly surprised me! As the market hits new highs and the possibility of a bubble bursts, machine-based investing could prove hugely beneficial.
Passionate about extreme board games with over a decade of finance and investing experience, Kanika Agarrwal, combined her interest with ambition and co-founded Upside AI – a portfolio management services company that uses machine learning to make fundamental investment decisions.
“Upside AI really started out as a science project,” Agarrwal recalls, stepping back in time.
The trio – Atanuu Agarrwal, Kanika Agarrwal and Nikhil Hooda – launched Upside AI in December 2017, combining their interests in technology, finance and investing with their individual entrepreneurial ambitions.
“Atanuu and I have dedicated our careers to investing, and Nikhil had just completed his doctorate in machine learning. In the middle of a board game session, we came up with the idea of building something that learns how ‘basically good’ is defined in the market, ”she said.
In reality, how machine-based investing works is a real dilemma for some.
The very foundation of Upside AI is the belief that technology will make better decisions than humans in the long run, because machines are impartial and emotionless decision makers.
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Upside AI uses technology to understand, recognize and buy from companies that are basically good companies and also in-demand stocks, said Agarwal who enjoys reviewing The Lord of the Rings trilogy every year.
“For us, we use machine learning to read the fundamentals of the business,” Agarrwal said.
The question an investor would ask now is, how is automated investing different from the manual form of investing where fund managers put their ten years of experience to good use.
“The main advantage of our model is that it is dynamic. it’s trying to understand the meaning of good fundamentals in the context of the market ”, Agarrwal explained.
“This means his approach is not limited – he can be a growth investor, a value investor or a commodities expert depending on where the winds are blowing,” a- she added.
Plus, the absence of bias or emotion means the machine has no baggage of its past successes and failures, unlike fund managers, noted Agarrwal who has worked with companies like Mayfield India, Credit Switzerland and EY.
When asked if machine learning would mean reversing a passive investing trend, she firmly denied it.
In fact, Agarrwal added, “Over the next decade, just like in the United States, rule-based products will become mainstream. This includes the liabilities of asset management companies and active products like ours ”.
Finally, when asked about Agarrwal’s investment strategy, especially when the market is hovering near record highs, the voracious reader said there were pockets of overvaluation and undervaluation.
Agarrwal added that after the first quarter results, Indian benchmarks are trading at very reasonable valuation multiples with significant tailwinds.
“Having said that, we don’t take short-term calls in the market,” she replied.
“Long-term markets are trending up, not down, and we’re there for the long term. For example, we are fully deployed today because we don’t believe in market timing, ”said Agarrwal who aims to make Upside AI the first all-tech asset management company in India.
Upside AI ranks among the top performing portfolio management services in India with a cumulative return of 71% since July 2019. In June 2021, PMS AIF World ranked Upside AI Multicap in the top 10 of its peer group products .
Thanks to performance and organic benchmarks, Upside AI’s assets under management have grown tenfold over the past year to over Rs 90 crore thanks to funds from several high net worth individuals and family offices.
(Edited by : Ajay Vaishnav)