AI-powered stock funds bet bots can pick stocks faster and better than humans

In Providence, Rhode Island, on October 14, a select group of fund managers are placing their trust in artificial intelligence to manage their investment strategies. These funds, powered by AI models, aim to analyze vast amounts of market data at speeds and efficiency that surpass human capabilities. Despite concerns and skepticism surrounding AI, these funds have shown promising returns, outperforming the market even with a short track record.

Currently, fewer than half-a-dozen ETFs, collectively managing only about $30 million of the industry's nearly $17 trillion in assets, rely solely on AI-powered bots for research and stock selection. This represents a minuscule fraction of the industry, but AI is gradually finding its way into the investment processes of most asset managers, even if it remains invisible to investors.

According to 91% of asset managers surveyed by Mercer, plans to increase AI use for portfolio management are on the rise. The AI-powered funds that have emerged so far have demonstrated their potential to generate returns that outpace the market. The AI Funds High Conviction US Equity AI-Managed ETF, launched in August by Tal Schwartz, has already attracted less than $20 million in assets, but Schwartz remains optimistic about its long-term prospects.

He believes that as more people witness the performance of these funds, their confidence in AI-driven investment strategies will grow.

However, the short track records and higher fees associated with these AI-powered funds may pose challenges for attracting widespread investor interest. Financial advisers and analysts caution that while AI can aid decision-making, there is still apprehension about fully trusting AI to make investment choices, particularly during market downturns.

Nonetheless, firms like Pictet Asset Management are embracing a more cautious approach, integrating AI into their investment processes to enhance efficiency and reduce human biases.