Not sure they can really be called robo-advisor
A reader (K) got in touch last week and asked me about Mitsubishi UFJ's new robo-advisor service Portstar. K was interested in the fact that it could be used in NISA accounts.
I'd never heard of it, but I took a look, and here is what I found:
Most robo-advisors (THEO, WealthNavi, Raku Wrap) don't offer NISA accounts, because they rebalance periodically by selling funds that have gone up and buying ones that have gone down in order to bring the portfolio back to it's desired allocation.
In a NISA account every time you sell something it comes out of the NISA and you lose the NISA allocation (up to 1.2 million yen a year) you used to buy it.
For example, if your portfolio is 50% fund A and 50% fund B, and at the end of the year fund A has grown and makes up 70% of your portfolio, in an ideal world you would sell fund A and use the money to buy more of fund B, bringing your portfolio back to 50% fund A and 50% fund B.
In a NISA account you could buy 600,000 yen's worth of fund A and 600,000 yen's worth of fund B, but at the end of the year if you had 900,000 yen's worth of fund A you couldn't sell it and buy fund B because you have already used up your entire 1.2 million yen's allocation for that year.
This means that normal robo-advisors don't work well with NISA.
However, the new service is not a stand-alone service, but rather a 'robo-fund'. It is a series of funds (with different allocations) that are managed by algorithms. This means they are basically actively-managed funds, but have lower annual costs than other active funds. You can buy them in your NISA account because they behave like a fund: any rebalancing happens inside the fund and you don't have to buy or sell anything.
They are also available in SBI's iDeCo account.
The Portstar funds have annual fees of 0.54%. There seem to be five of them, and MUFG has decided to go with a soccer/football theme ;)
Hence, Striker is the most aggressive allocation (it has 30% emerging market stocks!), Forward is next, Midfield, Defender, and Goalkeeper is the most conservative (77% bonds).
I don't know if this new offering really deserves to be called a robo-advisor, but it's an interesting concept and might be good for people looking for simple, one-step solutions for their NISA account.
I think you could probably create something similar by buying very cheap passive funds with annual feel in the 0.1-0.2% range, but it would be more work and you wouldn't be able to rebalance in the traditional sense (you can kind of rebalance by buying the lagging asset).
What do you think? Are the fees low enough to justify recommending this to novice investors? Anything I have missed? Are you interested in the Portstar robo-funds?