With financial markets making historic gains and losses week after week, stability and risk mitigation are critical factors for success in equity investing. Historically, quantitative criteria for indexes offered through financial products and index annuities have relied exclusively on structured historical data. To find a better-informed pathway to success, HSBC, EquBot and IBM Watson have collaborated to deliver a first-of-its-kind Artificial Intelligence-powered index that uses Watson technologies with EquBot neural networks to uncover new investment opportunities: AiPEX (AI Powered US Equity Index).
HSBC’s quantitative investment product knowledge drove product specifications to meet industry demand and regulatory standards. EquBot with Watson innovation was deployed to analyze over 20 years of structured and unstructured data to develop the instances powering AiPEX. The index functions in a fully autonomous manner where data is ingested, analyzed, and combined to identify US stocks with the highest probability of price appreciation.
HSBC is the exclusive licensor of AiPEX, which leverages Watson, IBM’s market-leading AI for business products and EquBot’s unparalleled financial understanding to ingest and learn from vast amounts of publicly available and continuously generated data. A company announcement, a tweet, a satellite image of a store parking lot, or even the tone of language a CEO uses during an earnings presentation can all be used as data points by AiPEX to aid in its decision-making.
Applying what it’s learned, AiPEX uses a rules-based process to objectively evaluate each of the 1,000 largest US publicly traded companies and select those stocks which appear poised for growth. While this approach is similar to fundamental equity research, it’s thousands of times faster and broader in scope.
Watson Discovery services provided best in class NLP tools and data enrichment technology that work seamlessly with the EquBot AI Investment Platform. Watson Studio also supports proprietary models to aid in the elimination of bias and drift. Finally, given the bespoke nature of the financial product and associated platform innovation, IBM’s client data integrity standards were of the utmost importance to develop trust between all parties involved.
“In today’s markets, investors need strategies that can keep up with the growing amount of data generated each day,” says Dave Odenath, Head of Quantitative Investment Solutions, Americas at HSBC Global Banking and Markets. “We are now able to offer clients solutions that not only keep up but also thrive in an increasingly complex world of data. AiPEX with Watson simulates a team of thousands of analysts and traders working around the clock to learn from millions of pieces of information and identify potential investment opportunities.”
AiPEX was also designed with transparency in mind, so that the product could be effectively distributed across the US and to global investors. Additionally, AI in the investment world is a relatively new frontier, so finding an initial investor base willing to engage in technical learning aspects of the product was vital. Athene USA, a leading provider of retirement savings products that now offers AiPEX in its suite of fixed indexed annuities, was the perfect partner to fill this role.
“The AiPEX index is the first of its kind to bring artificial intelligence technology to strategies within fixed indexed annuities, offering 100% equity exposure,” said Grant Kvalheim, CEO and President of Athene USA. “By partnering with HSBC to bring this groundbreaking index to our product platform, Athene builds on its reputation as a leading provider of unique, value-driven retirement solutions for the retail market.”
“We are only just now scratching the surface of what AI can do to transform index annuities and more broadly financial markets,” said Chida Khatua, CEO of EquBot Inc. “Combining Watson’s credibility, EquBot’s AI investment innovation, HSBC’s top-class investment operations and Athene’s product distribution skill has driven over $250M in product sales in only a few months. Investor interest continues to increase as the index is beating its benchmark by a significant margin.”