The World’s First AI Exchange-Traded Fund is Set to Run in Canada

A New Industry for AI

Today's artificial intelligence (AI), most experts will agree, is still far from what's called a general AI — one that can perform any task human beings are capable of. Yet, despite limitations, AIs have become rather powerful — at least enough to beat human beings in their own games, or even to take over performing certain tasks in a number of industries. In Canada, AI is gearing up for a new role: Horizons ETFs Management, Inc. is preparing to launch the Horizons Active A.I. Global Equity ETF on November 1.

In securities trading, an ETF or an exchange-traded fund is a marketable security that trades like a common stock on a stock exchange. An ETF portfolio is usually managed by a trust companies, and thus, by individual human beings.

This new AI-run ETF—which is listed on an exchange under the ticker MIND—will eliminate the need for a human to manage ETFs (though they will remain sub-advised by Mirae Asset Global Investments).  MIND works as an investment strategy that's actively managed by an AI system capable of figuring out investment patterns by analyzing data from 50 investment metrics. These metrics include money flow, a relative six-month performance, 90-day volatility, beta and 80-day simple moving average.

While these are all technical terms, the basic idea is that MIND is an AI investment manager and analyst. "As ETFs continue to proliferate, we see more investors asking about ETFs that provide exposure to multiple asset classes that go beyond a single sector, country or region; we anticipate this will be another big growth area of product development in the ETF space," Horizons ETF president and co-CEO Steve Hawkins said in a statement, as quoted by Canadian website The Globe and Mail.

Making a Case for Efficiency

The primary consideration for intelligent machines to take over human jobs is efficiency. On the business side, that means companies can maximize output and profit by turning to intelligent automation. For example, robots in factories can work faster than humans ever could physically. They're also better at performing repetative manual tasks. Self-driving taxis can operate at almost any hour, as they don't require the kind of rest human drivers eventually require. Number-crunching AIs can check insurance policies without the risk of missing relevant information a human employee could. In short, intelligent automation is making the case for more productivity through increased efficiency.

 

The same can be said of MIND. By having an AI that manages investments, you remove the investor bias and human emotion that may influence decisions. "An ETF driven solely by an A.I. has the advantage of interpreting millions of market data points in seconds, and will make investment decisions free of any human emotion, in the most efficient and effective manner for its portfolio," Hawkins said.

One of the experts who helped build the technology behind MIND is Korea University School of Engineering professor Junhee Seok. He made a similar case for MIND, explaining in a statement that AI-ETF "can make a significant change in the investment, and is able to cover the weaknesses of human intelligence which includes emotional decisions, as well as human error that can occur."