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

A handful of fund managers are exploring the potential of AI-powered stock-picking models to outperform traditional human investment strategies. 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 to control all aspects of fund management.

While this represents a small fraction of the industry, AI integration is gradually increasing as more asset managers experiment with AI-based portfolio management tools. Early results show these AI-managed funds are outperforming the market, even with their short track records. Tal Schwartz, founder of Ai Funds, launched the High Conviction US Equity AI-Managed ETF, which has attracted less than $20 million in assets but has already gained 2.7% since its August launch, surpassing the S&P 500's 1.1% gain.

Similar AI-enhanced ETFs, such as those from FinQ and Pacer, have also demonstrated strong performance. However, advisers and analysts caution that the short track records and higher fees of these funds may deter some investors. Despite these concerns, experts believe that AI's ability to process vast amounts of data and eliminate human emotions and biases could ultimately lead to wider adoption and increased investor confidence.