The debate between active and passive portfolio management has been going on for years. Is it more profitable to try and select stocks yourself, constantly seeking to maximize edge by buying and selling based on market conditions, or is it more lucrative to have longer holding periods and less turnover, regardless of market fluctuations? Artificial Intelligence ETFs could be the answer.
Tull believes that AI will enable investors to use computers and data analysis to optimize stock portfolio performance in the form of an ETF.
“When you look at the key to this new technology, it’s ensemble analytics—Touring Technology has been really working on this for several years now—and what happens is you’re going to be taking a technology which is based on predicting out-performance. The technology has been around for years. It’s just never been moved into the asset management space. So getting data collected, running permutations against it to figure out which is the best, and then really focusing on the best of the best selection that’s diversified. Picking a concentrated bet is not gonna be what an ETF is doing,” Tull explained.
“I don’t pick the stocks. What we’re doing is using all the data from all the smart beta ETFs, and we’re trying to build the smartest of all the smart baby ETFs, using this technology,” Tull continued.
ETF veterans like Dave Nadig agree that AI seems to hold a lot of promise.
Still, some experts are skeptical.
“I don’t understand it so I’m a little bit suspect of it. I think I’d want to dig into the research before I have a view on it per se,” said John Davi, founder and chief investment officer of Astoria Portfolio Advisors. But he added, “I like the idea of systematic, rules-based investing using a lot of data.
