By Suzanne McGee
(Reuters) – Qraft Technologies on Tuesday launched its fifth exchange-traded fund (ETF) that relies on artificial intelligence to select holdings, continuing its expansion of the niche AI ETF market.
The LG Qraft AI-Powered U.S. Large-Cap Core ETF will combine Qraft’s existing AI models with additional AI-powered forecasting tools developed by LG, the South Korean electronics conglomerate.
LG AI Research, a division of LG, has been applying artificial intelligence to everything from supply and demand forecasting to raw materials purchasing decisions.
Qraft is a financial technology firm based in Seoul, South Korea that has developed and launched a suite of AI-powered ETFs traded on U.S. exchanges. The company employs 70 data scientists and has developed models based on financial markets data and macro-economic indicators, said Francis Oh, Qraft’s Asia Pacific CEO.
LG AI Research’s 260-person engineering team adds large language modeling tools, he said, referring to artificial intelligence tools that are trained to recognize, understand and analyze text.
Thirteen ETFs already incorporate AI into their investment process, only two of which have outperformed broad market indexes, according to data from Morningstar Direct. Simplify Asset Management announced plans for a further three such funds last month.
“Good experiences will be the primary driver” of investor acceptance of these AI-powered investment products, Oh said.
He said that stripping human emotion from the stock-picking process is something investors will come to embrace.
The new ETF will use the AI model to build a 100-stock portfolio. It will be rebalanced every four weeks.
Investors will pay an annual fee of 0.75%, in line with other Qraft ETFs.
(Reporting by Suzanne McGee; editing by Michelle Price and Rod Nickel)