Shariah-compliant robo advisor Algebra to pilot in Asia before going global

Shariah-compliant robo advisor Algebra to pilot in Asia before going global

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By Tanu Pandey June 21, 2017 Malaysia-based private wealth management firm Farringdon Group is all set to finally launch its Shariah-compliant robo advisor Algebra next month, after its earlier plan to launch it late last year was delayed. A robo advisor is an online wealth management service that provides automated, algorithm-based portfolio management advice without the use of human financial planners. Farringdon Group believes Algebra, which can take minimum investments worth $4000, will cater not only to wealthy Muslim population in the region, but also the entire Islamic finance market, its CEO Stuart Yeoman told DEALSTREETASIA in an interaction. Farringdon is launching the product next month in Malaysia, and has partnered with local banks, a well known insurance firm and fintech firm for the product, which the company touts as the first such Shariah compliant platform in Asia. “We will focus on Asia for the time being. You need to look where the Muslim population is for the Shariah version. Obviously we are going to look at Middle East eventually. But we are piloting it in Asia first and see how it goes,” Stuart said. Algebra uses smart beta trading algorithms to derive its active equity portfolio and then blends it with Sukuk bond funds — fixed interest Exchange Traded Funds — to derive a risk weighted portfolio suitable for each investor’s risk appetite. According to the firm, the market opportunity for the product is worth $11.5 trillion. Research by the Malaysia Islamic Financial Centre shows that there is a growing appeal for Shariah-compliant products in the global Islamic fund industry with $58 billion in assets under management and expected to grow to $77 billion by 2019. The robo advisor from Farringdon will follow basic Islamic principles. It has bagged the approval of Shariah scholar Datuk Dr Daud Bakar of Amanie Advisors for its shariah investment strategy. It will be launched in Malaysia to go after the offshore market. “We are regulated by Labuan FSA, so we are the offshore jurisdiction,” said Stuart. Labuan IBFC is a midshore jurisdiction in Malaysia’s Labuan which has an internationally-recognised legal framework enforced by its regulator, Labuan Financial Services Authority (Labuan FSA). Established in 2007, Farringdon Group provides private wealth management and personal tax planning solutions for individuals across Asia Pacific, Russia and Central Asia. Farringdon Asset Management, part of the Farringdon Group operates in Singapore where it focuses on providing expat clients with discretionary portfolio management services.