AI and ETFs: the machines are coming

Please use the sharing tools found via the share button at the top or side of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email licensing@ft.com to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found here.
https://www.ft.com/content/98b1aea6-b0f0-4786-9899-2f674cb1ebf8

The machines are coming. Artificial intelligence can write songs, converse, and code — but can it supplant investment managers? While a growing number of AI-driven ETFs are trying to prove that it can, many are still struggling to outperform funds whose shareholdings are determined by humans or by companies’ market values. Several AI-powered ETFs have been launched with much fanfare over the past few years. Like mainstream ETFs, they are funds listed on a stock exchange that give investors exposure to a diversified portfolio of securities. But, unlike their non-machine counterparts, they use machine learning, sentiment analysis and natural language processing to identify patterns and trends that can help them select assets. Notable examples include South Korean Qraft Technologies’ three offerings — US Large Cap ETF (QRFT), US Large Cap Momentum ETF (AMOM), and the US Next Value ETF (NVQ), as well as the VanEck Social Sentiment ETF (BUZZ), EquBot’s AI Powered Equity ETF (AIEQ), Merlyn. AI’s Bull-Rider Bear-Fighter Index (WIZ) and its SectorSurfer Momentum ETF (DUDE), plus WisdomTree International’s AI Enhanced Value Fund (AIVI). So far, however, the performance of AI-driven alternatives has been inconsistent.