The first AI-powered investment fund, AIEQ, is listed on NYSE.

AI-Powered Fund Fails to Impress

Investment experts recognize AI as a tool that gives them an advantage through its ability to analyze data, learn from it and execute investment models, which can be especially useful when it comes to high-frequency trading. Undoubtedly, AI can sift through more data far faster than a human, according to a story in the Australia Financial Review:

Going a step further, an exchange-traded fund introduced in October uses AI algorithms to choose long-term stock holdings. It is too early to say whether the AI Powered Equity ETF will be a trendsetter or merely a curiosity. Artificial intelligence continues to become more sophisticated and complex, but so do the markets. That leaves technology and investment authorities debating the role of AI in managing portfolios.

But whether investment houses trust AI to make big decisions is another matter. Humans still have the final say, partly because of, well, the human factor involved in trading. Even though some analysts claim humans are too emotional and biased, they have a better ability to predict human behavior based on events better than AI currently can. Also, though AI may sound like a better bet in the long run, but the returns from the sole fully operated AI investment fund, which relies on IBM’s Watson computer to sort data, have been lackluster compared to human-controlled investing.

Between Oct. 18, when it began trading, and the end of the year, the ETF rose 3.1 per cent, compared with a 5.1 per cent gain for the Standard & Poor’s 500-stock index. …(Art Amador, one of the founders of EquBot, the company that created the AI Powered Equity ETF listed on NYSE as AIEQ) attributed the underperformance to a normal variability in returns. The fund’s programming beat the market when tested against historical data, he said, and he expects the same in real life as time passes.

Big fund management companies like Fidelity and Vanguard say use AI for some purposes and BlackRock uses it for scanning data and social media, but none claim to rely on AI for broader decision-making. It seems humans still outperform AI when it comes to predicting market movement, for the foreseeable future.

Read more at the Financial Review