The AI Powered Equity ETF (AIEQ) has garnered attention recently, but not for positive reasons. Despite using artificial intelligence to make investment decisions, the ETF has struggled to perform well, with a disappointing one-year return of -13.92%. In comparison, the Vanguard Total Stock Market ETF (VTI), covering the broad U.S. stock market, is up 2.12% over the same time period.
This has left investors questioning the effectiveness of AI technology in investing. That said, the fund has more than $104 million in assets under management, a comfortable amount for a fund from a small issuer.
AIEQ was the first actively managed ETF to rely on artificial intelligence to select its holdings. It uses IBM’s Watson technology to analyze various factors, such as financial statements, news articles, and social media posts. The idea behind the ETF is to eliminate human biases and emotions from investment decisions. And the algorithms underlying the fund’s management are designed to improve over time as more and more information is taken into account.
However, the recent poor performance of AEIQ has raised questions about the accuracy and limitations of AI technology.
A Fault in the Data?
Investors should keep in mind that AI technology is only as good as the data it is fed. Ultimately, despite advancements in recent years, that technology may not be sophisticated enough to make the most advantageous investment decisions just yet.
It is important to note that AIEQ is also a relatively new ETF, launched in October 2017, and may improve its performance over time as the AI technology underpinning it matures.