ADDX, a business driven by blockchain tech, is drawing on another area of innovation with a fund that uses machine learning to guide strategy.

Singapore-based private market exchange ADDX has listed a deep-value equity fund, managed by Aggregate Asset Management (AAM). The fund, which uses machine learning to drive returns and set strategy, highlights how such technologies are spreading through the investment world.

The fund targets a compound annual growth rate of 8 per cent and is open-ended, ADDX said in a statement. The fund is invested in more than 1,300 stocks listed in 17 countries including Singapore, Hong Kong, Japan, the US, and Germany.

The rise of businesses such as ADDX reflects how blockchain technology is being used increasingly to expand access to previously hard-to-enter asset classes. 

An ADDX-exclusive share class, which was launched and made available to investors at a minimum ticket size of S$10,000 ($7,456.36), does not charge any performance fees and has waived management fees until 31 December 2025, ADDX said.

Investors who subscribe directly via AAM typically must invest a minimum of S$100,000 and be subject to varying management as well as performance fees, it continued.

AAM is chaired by renowned Singaporean diplomat and geopolitical analyst Kishore Mahbubani, who formerly served as Singapore’s Permanent Representative to the United Nations and President of the United Nations Security Council. The fund management team taps Professor Mahbubani’s geopolitical expertise when evaluating investment opportunities.

Started in 2012, the Aggregate Value Fund’s strategy of acquiring stocks at a discounted price has delivered a compound annual growth rate of 6.1 per cent. In 2021, the fund managers started to use artificial intelligence technology to enhance its stock-picking methodology by evaluating 150 factors – 50 fundamental indicators, 50 technical indicators and 50 financial journal indicators – that influence the performance of company shares.

“Since the adoption of AI in managing AVF three years ago, we have beaten our benchmark, the MSCI AC Asia Pacific index, by 35 per cent. Despite such sterling results, our human analysts are still in charge of performing qualitative checks on every stock the AI picks,” AAM founder and executive director Eric Kong said. “Our AI will always be an enhancement, not a replacement, of our analytical process.” 

ADDX uses blockchain and smart contract technology to “democratise” access to asset classes such as private equity and venture capital. Such technology allows ADDX to cut minimum investment sizes from $1 million to $10,000, widening investor access to assets which were once the preserve of the ultra-wealthy or large organisations. To that extent, ADDX is part of a wider trend of firms using technology to make it easier for investors to enter the space.

In November 2021 ADDX, which is regulated by the Monetary Authority of Singapore, said that South Korean banking group KBFG had taken a stake in it. In December 2022, Securities brokerage CGS-CIMB Singapore switched on its connection to Singapore-based  private market exchange ADDX, giving all individual accredited investors on its platform access to ADDX’s offerings.

ADDX was formed in 2017 and has raised money in a series of funding rounds. Investors have included Singapore Exchange (SGX), the Stock Exchange of Thailand (SET), Temasek subsidiary Heliconia Capital, the Development Bank of Japan (DBJ), UOB, Hamilton Lane, Tokai Tokyo Financial Holdings and KB Securities, which is a subsidiary of Korea’s largest banking group KB Financial Group.