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The AI Powered Equity Exchange-Traded Fund, which launched in
the United States on Wednesday, will use IBM Corp's Watson
artificial intelligence technology to pick several dozen stocks
with potential to beat the market, the fund's backers say.
The actively managed fund chooses stocks based on a set of rules
created by EquBot LLC that uses artificial intelligence to
analyze up to 10 years of data on thousands of stocks, including
market sentiment, regulatory filings, news articles and social
media posts.
It ranks each company based on the forecasted probability that
each will profit from current economic conditions and world
events.
"There has been an explosion of information," Art Amador,
co-founder of EquBot, said in an interview.
The explosion of data from the internet and elsewhere needs to
be processed objectively, he said. "Humans do not have the
capacity or the retention rate to do that."
AI involves computers combing through troves of raw data to
recognize patterns and predict outcomes, and joins a set of
technologies displacing traditional - human - equity analysis.
Index-tracking ETFs have grown popular for letting investors
trade entire markets as easily as a single stock, with no
research necessary.
Even investors hoping to beat the market have increasingly
turned to algorithms to pick stocks with attractive prospects.
Starting in 2019, the Chartered Financial Analyst exam that is a
respected license for portfolio managers will add questions on
artificial intelligence, automated investment services and
mining unconventional sources of data.
The fund technically does have two human managers, Timothy
Collins and Travis Trampe of ETF Managers Group LLC, though they
will be "primarily making purchase and sale decisions based on
information" from the computer model, according to the fund's
offering documents filed with the U.S. Securities and Exchange
Commission.
The fund's managers said certain activities, including buying
stocks that are not easily traded, still need to be done by
people.
(Reporting by Trevor Hunnicutt; Editing by Jennifer Ablan and
Dan Grebler)
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