You have probably heard that there is an exchange traded fund (ETF) strategy for just about every kind of investing theme or trend. Some themes are very short-lived and fads, while others seem like they would be no-brainers and obvious for tracking traditional sectors and themes. Now there is an ETF launch for investors who want their stocks picked by artificial intelligence.
Wednesday brought on the launch of the AI Powered Equity ETF (NYSE: AIEQ) by EquBot for investors. This new ETF claims to be the first to apply artificial intelligence and machine learning throughout the investment process.
The launch is in partnership with ETF Managers Group. AIEQ is said to be an active ETF built on EquBot’s proprietary algorithms and is said to be the world’s first artificial intelligence ETF. It is using cognitive and big data processing abilities of IBM’s Watson to analyze and pick U.S.-listed investment opportunities.
Investors are going to want to know what it is that they are really buying. EquBot and ETFMG represents that the ETF’s portfolio generally will have a concentration of between 30 and 70 U.S. equities that have volatility that is comparable to the broader U.S. equity market.
The criteria here is quite broad, and it appears as though the ETF may be considering micro-cap investments along with large cap ones. The launch release indicated that AIEQ may invest in securities of companies of any market capitalization. The ETF’s expense ratio was set at 0.75%.
While all sizes of investments are considered, the chart on the next page shows the concentration with 65 different picks.
The company’s press release said:
EquBot’s approach ranks investment opportunities based on their probability of benefiting from current economic conditions, trends, and world- and company-specific events, and identifies those equities with the greatest potential for appreciation.
With artificial intelligence, computer systems are able to perform tasks that would normally require human intelligence, such as visual perception, speech recognition, decision-making, and translation between languages. In the case of AIEQ, the fund’s underlying technology is constantly analyzing information for approximately 6,000 U.S.-listed equities, including company management and market sentiment, and processes more than one million regulatory filings, quarterly results releases, news articles, and social media posts every day.
In short, the new AIEQ ETF hopes to mimic an army of equity research analysts that never sleep and to remove human error and bias from investing process. The ETF also hopes to automatically learn from experience and to keep improving without having to be explicitly programmed.
Art Amador, co-founder and chief operating officer of EquBot, said of the ETF:
We believe we’re pioneering a whole new investment category; one that will soon have investors and advisors diversifiying their portfolios among passive, active and AI approaches… Everyday, there is more information, not less. That information explosion has made the jobs of portfolio managers, equity analysts, quantitative investors and even index builders more challenging. New technology in artificial intelligence helps solve those challenges and we’re very pleased to be bringing AIEQ to market to make an AI approach to investing available to all.
Chida Khatua, CEO and co-founder of EquBot, said:
Machine learning is one of the most powerful applications of artificial intelligence. As powerful as many algorithms underlying expensive quantitative hedge funds and other vehicles might be, unless they’re also built with AI and machine learning baked right in, mistakes can be propogated and opportunities for outperformance can be missed.