USA
Qraft crafts AI-assisted quant ETFs
Korean tech company Qraft is helping list two actively managed “AI-assisted” quant funds with the help of white labeller Exchange Traded Concepts.
QRFT should perhaps have been called a multi-factor ETF. It will pick US large caps based on five factors – quality, value, size, low risk and momentum. Exposure to these factors will be measured over the last five years by a “proprietary artificial intelligence… process that extracts patterns from analyzing data,” the prospectus says. The fund is expected to hold roughly 300 companies and have a heavy healthcare sector tilt.
AMOM works in a similar way but is only interested in the momentum factor. It will hold a more concentrated portfolio of 50 stocks and will likely have a tech sector tilt.
In both cases Exchange Traded Concepts’ portfolio managers have final say over whether stocks the algorithm likes go in the fund. This means the fund has an active overlay.
Analysis – what happened to the deal with Mirae Asset?
Qraft is not new to the ETF industry. They are the mind behind the Toronto-listed Horizons Active AI Global Equity ETF (MIND). The CAD$12 million fund is an ETF of ETFs, investing in other Canada and US-listed ETFs based on the algorithm’s reading of the underlying indexes.
For the Canadian listing, Qraft worked hand in glove with Mirae Asset-owned Horizons. Mirae, like Qraft, is a Korean company. And according to reports in the Korean press, the two had etched together a deal on listing AI-backed ETFs in the US - this time under Mirae's Global X subsidiary.
Yet to judge by these listing, which are partnered with ETC not Mirae, that original deal has fallen through. So what happened? Did Mirae bail after MIND lagged on assets while charging a 0.90% fee? Or did Qraft think that Mirae was taking too many basis points while doing too little to sell the fund (a charge often raised against white labellers)? Who knows.