New Player Adds Tactical Sophistication To Robo-Advisor Landscape

Robo-advisors are still a small percentage of the overall wealth management industry, but there is no denying the rapid growth of these online-based money managers.

That rapid growth is paving the way for new entrants to the robo-advisor field, including New York-based Huygens Capital LLC, which describes itself as a systematic, tactical, ETF strategist and robo advisor enabled by proprietary predictive analytics.

Huygens is launching its tactical, risk-focused robo-advisor Monday, and it appears to be a well-timed entry into the robo-advising space. As of December 2014, the 11 largest robo-advisors had a combined $19 billion in assets under management, representing eight-month asset growth of 65 percent, according to Wealth Management.

That number has continued surging.

The Space

According to new data from Corporate Insight, online financial advisors increased their total assets under management by 11 percent in the first six months of 2015 to a total of $21 billion, even as markets remained relatively flat. Assets are up34 percentsince July 2014, Wealth Management reported in August.

Huygens' more tactical approach to robo-advising and the exchange-traded funds it selects for its portfolios are among the traits that could set the firm apart in the increasingly crowded robo-advising space.

The Huygens' Difference

The Huygens approach uses quantifiable measures of institutional money manager sentiment to identify periods of likely misalignment in supply and demand for U.S. equities. These measures are then used to assess if next-day equity market volatility is likely to be so elevated that the risk of severe declines outweighs the potential for gains. Because equity market sentiment can change quickly in response to changes in economic, political, or other factors, the system re-assesses conditions at market close each day, according to the firm.

While passive management has well-documented merits, few if any robo-advisors are assessing market conditions on a daily basis.

Investors can choose from three Huygens portfolios. The pilot tactical growth strategy is a growth strategy that can added a U.S. government bond ETF as market volatility arises. The pilot tactical aggressive portfolio is a slightly leveraged growth portfolio via equity index ETFs that repositions the portfolio to add U.S. government bond exposure and reduce equity exposure as market stress arises, according to Huygens.

The Huygens pilot conservative tactical income and growth strategy features U.S. equity and government bond ETFs.

Huygens aggressive strategies feature ETFs such as the iShares Russell 2000 Index (ETF) (NYSE:IWM), the largest small-cap ETF; and the PowerShares S&P Low Volatility ETF (PowerShares Exchange-Traded Fund Trust II (NYSE:SPLV)), one of the largest low volatility ETFs.

The firm's more defensive strategies can include SPLV and the iShares Barclays 7-10 Year Trasry Bnd Fd (NYSE:IEF).

Image Credit: Public Domain