Humans Take Heart: Even AI-Powered Funds Can’t Win At The Moment

Humans Take Heart: Even AI-Powered Funds Can’t Win At The Moment
Andrew Rummer

about 2 years ago1 min

Mentioned in story

If your portfolio’s taking a battering at the moment, you can at least take some solace that the machines are faring no better. 

As the chart above shows, on Monday ETFMG’s AI Powered Equity exchange traded fund (ticker: AIEQ) dropped to the lowest level since its 2017 launch compared to the benchmark S&P 500. The chart plots the fund’s performance divided by the S&P 500, so a rising line signals outperformance and a declining line signals underperformance. 

The $160 million actively managed fund uses IBM’s Watson artificial intelligence (AI) platform to decide what to buy and sell. Its model picks a hundred or so US stocks by scraping regulatory filings, news articles, sentiment gauges, valuations, and other market data. 

The fund's top holdings as of last week were chipmaker Advanced Micro Devices, cybersecurity provider Palo Alto Networks, and records management firm Iron Mountain. Just six trading days into the year, all three are down more than 10% as investors rotate out of fast-growing tech companies into cheaper parts of the market in response to speculation the Federal Reserve will raise interest rates several times in 2022. 

So next time you find yourself scanning your brokerage app in horror, remember that at least the robots are struggling to perform in the current environment too. 

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