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Horizons ETFs launches Canada’s first AI-driven ETF

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Horizons ETFs Management (Canada) has launched the Horizons Active AI Global Equity ETF (MIND), the first Canadian exchange traded fund to use artificial intelligence (AI) for all security selection decisions.

MIND provides actively managed exposure to global equity indices, by primarily using North American ETFs. Units of the ETF will begin trading today on the Toronto Stock Exchange (TSX) under the ticker symbol MIND.
 
MIND seeks to achieve long-term equity returns through investments in major global equity indices using a basket of primarily North American-listed ETFs. MIND is sub-advised by Mirae Asset Global Investments (Mirae Asset), which uses an investment strategy entirely run by a proprietary and adaptive artificial intelligence system that analyses data and extracts patterns. Horizons MIND may also hold cash and cash equivalents.
 
The machine learning process underpinning MIND’s investment strategy is known as Deep Neural Network Learning – which is a construct of artificial neural networks that enable the AI system to recognise patterns and make its own decisions, much like how the human brain works, but at hyper-fast speeds.
 
“The launch of MIND represents another milestone for Horizons ETFs and Mirae Asset’s global ETF business, as we strive to offer the best possible investment solutions through global collaborations,” says Taeyong Lee, President and Global Head of ETF Business, Mirae Asset Global Investments.
 
“MIND is expected to be able to more efficiently process market data and allocate assets than any human manager,” says Steve Hawkins, President and Co-CEO of Horizons ETFs. “Unlike today’s portfolio managers who may be susceptible to investor biases such as overconfidence or cognitive dissonance, MIND is devoid of all emotion. It is purely systematic in how it makes investment decisions.”
 
MIND monitors more than 50 investment metrics as the key development inputs from which it analyzes patterns and makes investment decisions. Some of the these primary inputs include: 80-Day Simple Moving Average, Beta, Sharpe Ratio, Money Flow, 6-Month Relative Performance, 90-Day Volatility, Simple RSI, Exponential RSI, Wilder Smoothing RSI, Moving Average Crossovers, Maximum Drawdown, Short Interest and Correlation.
 
MIND rebalances its holdings on a monthly basis to give the AI more flexibility around the investment allocation process. Additionally, the AI adheres to a set of minimum and maximum exposure requirements, such as cash and cash equivalent holdings, regional restrictions and country restrictions.
 
“Despite Canadian investors slowly overcoming their home bias and wanting to invest in international markets, the expertise required for a global strategy can be costly and time-consuming for the average investor to pursue,” says Hawkins. “In our view, an AI system, as an active manager in this space, significantly streamlines the process and makes buying a whole world of ETFs as easy as trading a single stock on an exchange.”
 
South Korean-based Qraft Technologies Inc (Qraft), a manufacturer of AI investment systems for various financial institutions, created the technology powering MIND. In 2016, Mirae Asset contracted Qraft to create the AI to perform the investment decisions for the Mirae Asset AI Smart Beta/Smart Beta Market Hedged Fund, as well as the Mirae Asset AI ASEAN Fund.
 
To ensure that MIND had the necessary experience to actively manage a global equity portfolio on a forward-looking basis, Qraft did rigorous live testing with 10-years of historical investment data to give MIND’s AI system the necessary experience it needed to interpret data, draw conclusions and allocate assets.
 
Qraft is a founding partner of the Mirae Asset Intelligent Finance Research Center and continues to develop artificial intelligence technology that can be applied directly to financial business, working in cooperation with Korea University.

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