Value Investing

Artificial Intelligence Moving into Mutual Funds

 Artificial intelligence, which has been used by institutional investors for some time, is now making its way to individual investors as well. This according to a recent article in The Wall Street Journal.

The article cites two new products that were launched in October and that use AI: AI Powered Equity ETF (AIEQ) and Credit Suisse RavenPack Artificial Intelligence Sentiment (AIS) Index. AIEQ, the article says, is the first ETF supported by IBM’s Watson cognitive computing platform.

The article explains, “Both AIEQ and AIS work on the same principle—they rely on machines to analyze reams of analyst notes, article, earnings-call transcripts, regulatory filings and social media posts on individual companies to gather insights about how they might perform. From there, the software determines the weighting of their respective indexes and trades.”

Mutual and fixed-income funds are also starting to integrate AI into their investment processes, the article says, adding that the surge in the amount of data available has improved analytic capabilities for fund managers.

But humans are not obsolete, says WSJ, citing comments from Michael Kollo, head of research and chief quantitative strategist for Rosenberg Equities: “The technology itself is only a tool, like a shovel or a hammer. Success still depends on the skill of the manager running the strategy. Investors still need to understand the team, what the process is and what the goals are before they invest.”

 

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Source: validea.com