Robo-advisers shine in retirement pension market with returns surpassing major indices

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Robo-advisers (RAs) are increasingly making their mark in the retirement pension market as their algorithms become more sophisticated, achieving returns that outperform major global indices, industry officials said Monday.

RAs are artificial intelligence-powered services that automatically diversify investments based on an individual’s risk profile.

According to the robo-adviser testbed operated by Koscom, an IT system provider owned by the Korea Exchange, two algorithms from NH Investment & Securities led the pack with six-month returns of 61.03 percent and 58.75 percent among 170 commercially available actively managed retirement pension RAs as of Friday.

Samsung Securities’ algorithm followed closely, gaining 56.46 percent over the same period.

Advisory firms and companies specializing in RAs have also posted impressive results.

ML Investment Advisory’s product recorded a six-month return of 44.15 percent, while artificial intelligence (AI) company Quantec’s product gained 38.72 percent.

These RA algorithm returns have outperformed major global indices. Over the same period, the U.S. S&P 500 climbed 27.85 percent, while the Kosdaq rose 33.66 percent. Five algorithms achieved six-month returns exceeding 50 percent.

“The fact that RA algorithms have outperformed major indices is significant. AI algorithms are evolving at a rapid pace,” an official at one of the major securities firms said.

Industry insiders noted that investments are also advantageous during market downturns. By focusing on asset allocation and removing human emotions from the decision-making process, these diversified investment algorithms help curb emotional behaviors like panic selling.

As of the end of August, domestic assets under RA management reached 1.06 trillion won ($744 million), continuing a three-month growth streak since first surpassing 1 trillion won in May.

Under current rules, retirement pension RA investments are restricted to individual retirement pension accounts. Still, they remain a valuable option, as the annual contribution limit of 9 million won can be carried over if unused, increasing long-term investment potential.