There is a plethora of AI-related investment opportunities, with the winners and losers yet to be determined.
With AI still in the early innings, active managers are able to capture unique opportunities that passive funds might miss. Passive funds are inherently backward looking, often rebalancing quarterly or semiannually, and thus reflecting moves that have already happened.
“Thematic investing is really focusing on identifying some of the transformational changes across industries and across society,” Lei Qiu, portfolio manager, disruptive innovation equities, for AB, said during VettaFi’s AI Symposium on August 30.
“Benchmarks tend to be backward looking. It rewards the proven winners, and it doesn’t necessarily capture the moment of change when the big ideas come along. So that’s where active management comes in,” Qiu added.
Importantly, Qiu said, identifying a big theme does not necessarily translate into creating a portfolio that will generate superior returns. While thematic investing can help investors generate superior returns over time, it takes an active manager to dig through the themes to determine which opportunities are mature enough, with a large enough total addressable market.
When selecting securities, Qiu said it’s important to consider company management. This level of scrutiny is something unique to active management; something that benchmarks can’t do.