Look Out World, Your Artificial Intelligence ETF Is on the Way

(Bloomberg) -- The artificial intelligence ETF is going global.

The AI Powered International Equity ETF, ticker AIIQ, debuted Wednesday, according to a statement from its creator, EquBot. The exchange-traded fund is the first to use AI technology to pick stocks from developed markets outside of the U.S. It arrives about eight months after San Francisco-based EquBot’s first product, the AI Powered Equity ETF, ticker AIEQ, which has gathered almost $140 million in assets.

The same software that underpins AIEQ’s stock selection system and runs on International Business Machines Corp.’s Watson platform will drive AIIQ. The ETF will create a portfolio of between 80 and 250 stocks -- choosing from more than 15,000 companies across the globe. That’s more than twice the number of firms U.S.-focused AIEQ considers.

“We are processing more news information, more data around different countries,” Chida Khatua, chief executive officer and co-founder of EquBot, said by phone. “We also added different capabilities like global macros and country risks, and integrated all the different modules to our platform.”

ETF Learning

The actively managed ETF charges $7.90 for every $1,000 invested, slightly more expensive than its domestic counterpart. Of course running a global portfolio isn’t simple. There’s no shortage of geopolitical challenges to sift through, what with populists set to start governing in Italy and snap elections likely in Spain. According to Khatua, AIIQ will be up for the challenge.

“That is the beauty of our system,” he said. “It can go and automatically reallocate or rebalance the weightings across different countries based on the current events.”

Domestically-based AIEQ has topped the S&P 500 Index by five percentage points this year. That’s a change from 2017, when the broader benchmark outperformed the ETF from its inception in October through the end of the year. The fund’s recent success is a hopeful sign for its makers, who say it has the capability to get smarter over time.

“Every decision it makes every day, it learns from it,” Khatua said. “The same philosophy goes to AIIQ.”

To contact the reporter on this story: Sarah Ponczek in New York at sponczek2@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Eric J. Weiner, Brendan Walsh

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