EquBot LLC, in partnership with ETF Managers Group (ETFMG), has launched what it describes as the world’s first ETF powered by artificial intelligence (AI): the AI Powered Equity ETF (AIEQ).
AIEQ is an active ETF built on EquBot’s proprietary algorithms and is the world’s first AI ETF, utiliding the cognitive and big data processing abilities of IBM Watson to analyse US-listed investment opportunities.
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. EquBot and ETFMG expect the fund’s portfolio to typically consist of 30 to 70 of US equities only and volatility comparable to the broader US equity market.
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 analyding information for approximately 6,000 US-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.
“ETFs have made beta ‘smart,’ but with AIEQ we’re looking to make investing intelligent,” says Chida Khatua, CEO and co-founder of EquBot LLC. “EquBot AI Technology with Watson has the ability to mimic an army of equity research analysts working around the clock, 365 days a year, while removing human error and bias from the process.”
Khatua notes that the approach underpinning AIEQ also includes machine learning, giving it the ability to automatically learn and improve from experience without being explicitly programmed.
“Machine learning is one of the most powerful applications of artificial intelligence,”Khatua says. “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 propagated and opportunities for outperformance can be missed.”
“With the launch of AIEQ, we’re not only bringing our new fund to market,” says Art Amador, co-founder and COO of EquBot. “We believe we’re pioneering a whole new investment category; one that will soon have investors and advisors diversifying their portfolios among passive, active and AI approaches.”
“Artificial Intelligence is making life better for individuals as its application expands across industries,” says Sam Masucci, CEO and Founder of ETF Managers Group. “We are excited to be the first asset manager to bring AI into portfolio management and the ETF space, providing investors with another first-to-market ETF product.”
AIEQ may invest in the securities of companies of any market capitalisation and will have an expense ratio of 0.75 per cent. “Everyday, there is more information, not less,” says Amador. “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.”