New Player Teams With ‘Old Hand’ On Two Active AI ETFs
MAY 21, 2019 • JEFF SCHLEGEL
A South Korean technology firm and an Oklahoma-based exchange-traded fund advisor have come together to launch two ETFs powered by artificial intelligence.
The Qraft AI Enhanced U.S. Large-Cap ETF (QRFT) and Qraft AI Enhanced U.S. Large Cap Momentum ETF (AMOM) that debuted on Tuesday are actively managed products based on a proprietary artificial intelligence security selection process developed by Qraft Technologies that extracts patterns from analyzing data. Qraft is a Seoul-based provider of AI investment systems to various financial institutions in South Korea.
Exchange Traded Concepts, a private-label ETF advisor based in Oklahoma City that helps firms launch ETFs through its turnkey solution, has licensed Qraft’s AI security selection process to manage the two funds.
The Qraft AI Enhanced U.S. Large-Cap ETF provides exposure to five investment factors that can impact stock prices: quality, size, valuation, momentum and low risk. As described in fund literature, the fund’s weightings to the five factors are dynamic because certain causes or conditions may affect the returns of these investment factors. Qraft believes that AI can identify and quantify relationships that are not readily apparent to humans, and in doing so it enables Qraft’s process to assign stock weights that are in line with the targeted factor weights for the portfolio.
The fund intends to hold 300 to 350 stocks, and its expense ratio is 0.75 percent.
The Qraft AI Enhanced U.S. Large Cap Momentum ETF uses AI to quantify the momentum factor by seeking to define the optimal lookback period for momentum and if the relationship between past and future returns is changing. It also aims to place more weight on the most relevant data, and it recommends weighting a company in the portfolio based on its potential for maximum returns versus other companies.
The fund’s target portfolio size is 50 stocks, and its expense ratio is 0.75 percent.
ETC says both ETFs can fit into an investment portfolio as either a large-cap equity, dynamic factor or alternatives allocation.