AI-Powered Int’l ETF Debuts

Equbot, the firm behind the AI Powered Equity ETF (AIEQ), has added to its offering today with the launch of an international fund with a similar focus. The AI Powered International Equity ETF (AIIQ), like AIEQ, is actively managed and relies on artificial intelligence, including IBM’s Watson supercomputer, to select its portfolio; however, its focus is not on the U.S. but on foreign developed markets.

The fund comes  with an expense ratio of 0.79%, only four basis points more than AIEQ, and lists on the NYSE Arca.

Equbot CEO and co-founder Chida Khatua says the fund is designed as a complement to the flagship AIEQ.

“To fully understand the factors impacting an individual equity, you must be able to locate, synthesize and analyze thousands, sometimes millions, of pieces of data. Clearly, there is no way an analyst or even a team of analysts could process that much information in a timely manner,” Khatua said. “That is where the power of AI comes into the equation. As the volume of data explodes, the need for powerful, quantitative, objective analysis grows, particularly when building a portfolio of equities from developed markets around the world.”

Equbot runs its quantitative model on IBM’s Watson platform, essentially analyzing 10 years of fundamental data and applying it to current markets and current events. The model does this on a daily basis by using the gathered data—global events, economic conditions and trends—to determine the likelihood of an individual company seeing upside from it over the following 12 months. From there, the model selects the 80-250 stocks that have the highest probability of outperformance over the next 12-month period and provides recommended weights for them, the prospectus says.

Continuous Improvement

Watson is capable of natural language processing and machine learning, and as such, its analysis is continually being improved to provide more effective results. According to the document, companies are limited at individual weights of 10%. And according to Khatua, the fund model looks to spread risk across countries and avoid portfolio bias of all types.

In fact, the fund looks to maintain volatility on par with the overall non-U.S. developed space, the prospectus says.

Khatua points out that to accommodate the international angle of AIIQ, the model has been expanded from the U.S. version to include things like country risk, geopolitical risk, country exposures and global macro analysis. Additionally, while the model for AIEQ analyzes about 6,000 U.S. companies, AIIQ’s model looks at 15,000 companies worldwide.

“It is more countries, more data and more investment opportunities,” Khatua said.

Equbot serves as the fund’s advisor, while Vident Investment Advisor acts as the subadvisor.

Equbot’s first ETF, AIEQ, launched in October 2017 and has since accumulated $136 million in assets under management, while significantly outperforming the SPDR S&P 500 ETF Trust (SPY) year-to-date.

Contact Heather Bell at [email protected]