A Canadian asset manager launched an exchange-traded fund (ETF) that uses artificial intelligence (AI) rather than humans to create an AI-specific portfolio.
A Canadian asset manager introduced an exchange-traded fund (ETF) that uses artificial intelligence (AI) rather than humans to develop an AI-specific portfolio on Monday.
“We’d been looking at the AI space for about two years, and investors had asked us to develop an AI-themed product,” said Raj Lala, president and CEO of Evolve Funds Group Inc. “This, surprisingly, seemed to be a space in the market that hadn’t been filled.”
AI has been a popular investment concept for the past year or so, and ETF issuers have enthusiastically launched new AI-focused funds to fulfill investor demand. Some have employed AI’s massive language model technology to design portfolios but have had less success in drawing investor interest or developing returns.
None of those AI-generated portfolios are particularly targeting AI investments, and many of the funds do not have Nvidia or other AI mainstays among their top holdings, according to Todd Sohn, an ETF analyst at Strategas.
According to Lala, the Evolve Artificial Intelligence Fund would eventually invest in megacap technology giants such as Nvidia and Microsoft. However, up to half of the portfolio will be invested in lesser-known companies such as UiPath Inc., which provides AI software for robotics, and CorVel Corp., which develops AI solutions to reduce healthcare costs.
According to Lala, the most difficult aspect was identifying those companies. “It was like trying to figure out who’d benefit from the Internet back in the 1990s.”
Evolve employs a model developed by Boosted.ai, an AI consulting firm that serves the financial industry, to sift through publicly traded North American equities in search of those with the appropriate level and type of AI exposure.
The fund will rebalance quarterly, and Lala does not expect its largest positions to fluctuate significantly. That, according to Lala, should help the new ETF avoid high, costly turnover, which analysts believe makes previous AI-powered ETFs less enticing.
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