Investors keen to get even deeper into the AI revolution have new AI-powered ETFs to choose from.
If buying AI-focused companies is not enough, investors can now opt for bots to manage their funds for them.
Fintech firm Qraft has unleashed a new AI-managed ETF that aims to minimize downside losses for investors through its algorithms. The QRAFT AI-Pilot U.S. Large Cap Dynamic Beta and Income ETF launched on the NYSE Arca under the ticker “AIDB.”
AIDB’s exposure between US Large Cap equities and cash/cash equivalents is adjusted weekly to shield investors from sudden sell-offs and price drops. AIDB harnesses over 70 macro and market data sets to adjust exposure to large-cap U.S. stocks dynamically. It monitors real-time market risk signals to optimize price performance, including momentum, volatility, and correlation.
According to the fund’s investment thesis, its algorithms can “uncover patterns and signals amid massive data set that humans alone cannot discover.”
The fund’s founder believes cool, algorithmic precision can be an antidote for the fallibility of human traders’ intuition.
“We believe the application of AI in actively managed funds transcends the limitations of the human mind, allowing for potentially better risk management and investment decision-making,” says Marcus Kim, founder, and CEO of Qraft. “This is an especially relevant potential benefit for investors in times of market distress when emotions and biases are heightened.”
The South Korea-based company has been trying to bridge the gap between AI innovation and investing since 2016. Besides the ETF, it has other AI-powered investment tools, including search and allocation engines and AI order execution systems that have been adopted by over 20 financial institutions worldwide. Last year, Qraft finalized a strategic partnership with SoftBank Group, securing US$146 million in capital from the Japanese investment bank in the process.
Risk-managed funds have caught on recently as investors reel from an increasingly volatile world shaped by black swan events, geopolitical tensions, and other disruptive forces. Many other risk-managed funds offer protection against downside losses but also cap upside gains. Qraft’s AIDB, however, does not cap upside gains, which could make it a competitive offer, potentially enticing more growth-focused investors.
Yet with so much excitement surrounding AI, it’s important for investors not to get prematurely impressed by the tech and assess the returns objectively.
AI-powered ETFs have existed for a few years and have not always been up to the hype.
One of the first, AIEQ, launched in 2017 and, after managing to keep up with market indices for a few years, has trailed far behind since 2021. Over its short life, it has underperformed not only the S&P 500 but a number of other small and mid-cap indexes too.
Time will tell whether AIDB can indeed deliver substantial gains with minimal volatility and thus bring substantially higher risk-adjusted returns (Sharpe Ratio).
AIDB has an expense ratio of 0.75% and is currently trading around $25 on the New York Stock Exchange ARCA.
Originally published at Wealth of Geeks.
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