How Qraft and Kaiju Are Using AI to Potentially Enhance Returns

Investing involves risks, including the potential for principal loss and there can be no guarantee that the strategies and processes promoted will be successful.

The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate. An investor’s shares, when redeemed, may be worth more or less than their original cost; current performance may be lower or higher than the performance quoted. For the most recent month-end and standardized performance and current holdings go to QRFT and AMOM.

By Elle Caruso

Aug. 30, 2023

Some ETF issuers are not only investing in AI, but are instead investing with AI.

Utilizing machine learning, we believe AI-driven strategies can adapt to market environments better than human managers.

Notably, using AI in the investment space is not a new thing. Hedge funds have long been using deep learning engines to analyze market data and separate the signals from the noise to identify investment opportunities, Francis Oh, CEO of Qraft Technologies, said during VettaFi’s AI Symposium on August 30.

Oh said ETF issuers like Qraft Technologies and Kaiju are utilizing AI to duplicate the human portfolio managers investment and decision making processes.

The additional benefit of AI, however, is the lack of emotional bias. AI is able to make methodical, calculated decisions without being influenced by emotion. AI uses a data-driven approach to potentially enhance returns, limiting human behavioral mistakes, Oh said.

“We believe that emotional biases can be one of the performance draggers, in the long term,” Oh said.

Importantly, AI gets smarter over time. Oh cited ChatGPT as an example of AI’s continued advancement.

When ChatGPT was first introduced a couple years ago, its uses were limited and it was riddled with errors. However, by 2023, ChatGPT has become advanced enough to have many real-life applications and uses.

“Similar cases can be [seen]in the AI models in the financial markets, as well,” Oh said.

There are two ways in which AI will get smarter over time. As new data becomes available, AI models will process the data and learn from it. Additionally, the tremendous advancements in technology will continue to advance AI and potentially enhance its accuracy in stock prediction in financial markets.

AI ETFs Available to Investors

Three compelling ETFs run using AI include the QRAFT AI Enhanced U.S. Large Cap ETF (QRFT), the QRAFT AI-Enhanced U.S. Large Cap Momentum ETF (AMOM), and the BTD Capital Fund (DIP).

QRFT and AMOM leverage AI models’ prediction power to deliver potentially better returns over time.

“Instead of a thematic approach, what QRFT and AMOM are trying to do is trying to elevate the return from the markets,” Oh said.

While the underlying strategies are similar, QRFT is a broader approach than AMOM. QRFT is trying to beat the S&P 500. The fund comprises 350 stocks which are chosen and rebalanced on a monthly basis. The model selects the stocks that have the highest probability of beating the S&P 500.

On the other hand, AMOM has a focus on momentum and is a more concentrated portfolio. AMOM comprises 50 stocks and, like QRFT, rebalances monthly. Oh said AMOM has more flexibility in getting in and out of positions, so investors can expect to see the fund profit taking when a stock has rallied well.

DIP uses AI to capitalize on quick-return opportunities in the market. DIP identifies market dislocations, initiates buys, and then instructs when to sell rebounded shares in short order — replacing a significant portion of the ETF’s holdings every day.

To view this session and others from the AI Symposium, register for the on-demand replay.

For more news, information, and analysis, visit the Artificial Intelligence Channel.

Artificial intelligence selection models are reliant upon data and information supplied by third parties that are utilized by such models. To the extent the models do not perform as designed or as intended, the strategy may not be successfully implemented and the Funds may lose value. If the model or data are incorrect or incomplete, any decisions made in reliance thereon may lead to the inclusion or exclusion of securities that would have been excluded or included had the model or data been correct and complete. Service providers may experience disruptions that arise from human error, processing and communications error, counterparty or third-party errors, technology or systems failures, any of which may have an adverse impact.

Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Fund, please call 1-855-973-7880 or visit our website at www.qraftaietf.com. Read the prospectus or summary prospectus carefully before investing.

Distributed by Foreside Fund Services, LLC