The future of investments and trading
Even before COVID-19 began its global rampage, businesses, investors and traders were exploring new ways to deliver investment.
Driven by environmental and social concerns, and sceptical of banks’ fees and integrity following the global financial crash, investors wanted more direct access to investments and businesses wanted to minimise transaction fees.
Following a slight wobble in 2008/9, global alternative investments began growing at seven times that of traditional asset classes, with a number of crowdfunding sites launched around the same time. Crowdfunding and alternative investment markets have continued to grow, reaching market caps of nearly £800m and £104bn, respectively, by the end of 2019.
Ever since coronavirus reached pandemic status, however, the markets have tumbled. Reduced or stopped trading has obliterated profits for the quarter while government bailouts are all that have been keeping some industries, such as airlines, afloat. Fortunately, activity is expected to rebound quickly, with the anticipated transaction value for crowdfunding in 2021 topping £818m.
A recent survey of PYNK members found that 38% predicted that the Dow had already reached its lowest point and 31% predicted that the lowest point would come before August. As such, 45% said that they think now is the best time to invest in startups, providing an opportunity to rapidly grow as the world exits lockdown.
How has coronavirus impacted the investment market?
Diversification of markets, investment vehicles and investors is, in general, good for the economy. More people have access to investments leading to a more diversified shareholder base. A diverse shareholder base means more reliable and robust financing ‒ no longer do businesses need to bend to the will of a single large investor or risk a run on their shares.
That being said, the coronavirus lockdown has made everything a bit weird and surreal. Now there are anecdotal reports of a 10-year-old struggling to play Fortnite as half his squad are off day trading on Robinhood.
However, trading platforms, like the crowd-led Robinhood, are creating large markets of unsophisticated investors. These investors are then having the wool pulled over their eyes by less-than-scrupulous CFOs, such as the recent case of Hertz.
The car rental company recently declared bankruptcy due to a rapid fall in revenues, yet then sold $1bn in equity to independent investment bank Jefferies who in-turn began selling it on Robinhood, effectively transferring that money from daytraders to impaired debtors.
This led to a jump of over 100% in Hertz share price after the company declared bankruptcy. That means those shares may end up worth 35 cents on the dollar or even completely worthless, with unsophisticated investors bearing the brunt of the losses.
Where will the future of investments and trading take us?
Clearly, in a world where 10-year-olds are taking long positions on bankrupt stock, some strange bubbles are going to appear. Traditional investment intelligence is struggling to adapt, adding more hot air to the bubbles. So how can traders be confident in their investments?
Our answer at PYNK is to turn to the power of AI and Crowd Wisdom. For some years now, AI has been heralded as the answer to accurate investment analysis. The ability of AI to identify patterns in large data sets makes it good at anticipating future events/movements and at making decisions.
AI has already been used to provide automated insights, alternative datasets, growth opportunities, improve risk performance, generate reports and much more besides. This makes information gathering and analysis much quicker and more accurate, yet it lacks the human element.
That’s why, at PYNK, we combine our AI algorithm with the power of crowd wisdom. The idea behind crowd wisdom came about in 1907 when a statistician named Francis Galton asked people to guess the weight of an ox. Galton found that, while individual guesses varied wildly, the median guess was within 1% of the ox’s actual weight.
Since then, statisticians have been finding ways to minimise participant bias and improve the accuracy of crowd wisdom. We incorporate our learning into our AI algorithm, using machine learning to improve results over time.
The results have been startling. One market we’ve been tracking the longest ‒ Bitcoin ‒ is notoriously unreliable and tempestuous. Yet, using the power of crowd wisdom and AI, our platform anticipated every single major movement!
With that in mind, we decided to survey PYNK members to apply the power of crowd wisdom to broader market categories. Key results of the survey include:
- Energy (24%) and HealthTech (20%) are predicted to be the most promising sectors over the next 5 years
- 45% said that now was the best time to invest in startups
- 38% predicted that the Dow has already hit its lowest point
- 31% predicted that the Dow would hit its lowest point by July-August
- 34% said that Asia and Australasia was the most overvalued regional market
Source: Survey of 1,471 PYNK members between 27th March and 10th April
Combining the power of crowd wisdom and AI with the rise of a diversified investor base, it seems clear that the future of trading and investment will be much more globalised, democratised and personal. Individual day traders will end up having access to the same information and marketplaces as large banks and financial institutions, while social media and other digital communications platforms will organise traders into nebulous groups.
Ultimately, it will be these crowds which fund the future.
This article was contributed by Seth Ward, Co-founder of PYNK
Seth Ward is a serial entrepreneur and co-founder of Pynk.io. By leveraging wisdom in crowds together with their proprietary AI ‘Rose’, Pynk can better predict the future, and make smarter investment decisions which empower the whole Pynk community towards a better financial future.
Seth and the Pynk team have grown Pynk to be: ‘Best AI Start-Up’ at the Malta Blockchain Summit; Semi-finalists at WebSummit 2019; a VC-vetted fintech start-up to watch by Business Insider; in the top 2% of 3.5k startups selected to join the Founder Institute’s Elite programme.
Aviva Investors launch $350m global climate credit fund
Aviva Investors has launched a climate transition global credit fund and has already allocated US$350m in strategic capital.
The funding, which has been provided by Aviva’s UK and Irish multi-asset funds, will be used to invest in companies offering goods and services that support climate change mitigation and the move towards a more sustainable future.
According to reports, the fund is in line with Aviva’s ESG philosophy on green policies and the United Nations sustainable development goals. It will be handled by portfolio managers Justine Vroman and Tom Chinery, as well as the noted climate specialist, Rick Stathers.
Aviva sustainable investment strategy
Companies excluded from the investment fund will be those entrenched in the fossil fuel industry, while enterprises that look at solutions to climate-related problems, such as sustainable transport, renewable energy and environmentally conscious lending, will be targeted.
Aviva Investors confirmed the goal is to capture transition-oriented companies with low decarbonisation and physical impact risk.
The initiative will also be benchmarked against the Bloomberg Barclays Global Aggregate Corporates Index, investing predominately in investment-grade companies and a small allocation of up to 5% in high-yield bonds.
Colin Purdie, Aviva Investors chief investment officer for credit, explained, "We can't pivot to a lower-carbon world if all we do is rule out the poor performers and only invest in companies that provide solutions to climate change. All companies need to adjust for a warmer, lower carbon world, which is why we felt it was important to use a wider transition lens to capture a larger set of businesses beyond those with obvious green credentials."
He said, "As investors, it is our responsibility to look beyond small pockets of green finance to engage and mobilise the liquidity of the wider credit market to assist in climate transition and the achievement of net zero carbon emissions."
Purdie added, "Companies that don't adjust their business models will be less attractive to investors and will present a less compelling investment case over time. Climate laggards may find that their financing becomes more expensive than that available to climate leaders."