South Korean artificial intelligence firm Qraft Technologies has unveiled a new actively managed US large-cap equity ETF on NYSE Arca that seeks to mitigate downside losses through an AI-powered risk model.
Marcus Kim, Founder and CEO of Qraft Technologies.
According to Qraft, the Qraft AI-Pilot US Large Cap Dynamic Beta and Income ETF (AIBD US) represents a first for the ETF space as the only, fully AI-powered risk-managed ETF in the market.
Qraft’s proprietary risk model accounts for over 70 macro and market data sets, assessing factors like momentum, volatility, and correlation in a bid to predict the suitability of risk-on or risk-off positioning.
The model is run on a weekly basis, generating a ‘risk-on score’ between 0 and 100 that translates to a suggested allocation to ETFs tracking the S&P 500. The fund’s remaining allocation is dedicated to cash-equivalent debt securities.
Risk-managed strategies have gained in popularity in recent years due to heightened financial market volatility spurred by inflation, geopolitical unrest, and other headwinds.
Qraft maintains that it is offering a unique investment proposition, however, as the ETF combines human intuition oversight with the superior processing and analytical depth delivered by AI. Also, compared to many existing risk-managed strategies, the fund does not cap potential upside gains and may be less likely to lag market moves.
The ETF comes with an expense ratio of 0.75%.
Marcus Kim, Founder and CEO of Qraft Technologies, commented: “We believe the application of AI in actively managed funds transcends the limitations of the human mind, allowing for potentially better risk management and investment decision-making. This is an especially relevant potential benefit for investors in times of market distress when emotions and biases are heightened. We’ve introduced AIDB to extend these benefits to investors seeking dynamic equity exposure amid global market volatility by anchoring this fund’s strategy to our time-tested AI risk prediction model.”
Francis Geeseok Oh, APAC CEO of Qraft Technologies, added: “Unlocking the power of AI to surpass the limitations of human investing has been our goal since 2016, and we’re so proud to deliver this new ETF at a time when we believe investors are seeking a new way to manage risk. Qraft has been providing AI-powered dynamic beta risk management solutions to institutional investors in South Korea since 2019, with its proven reputation and record of helping investors navigate the market more smoothly by managing downside risk with our AI model’s prediction power. AI’s speed and prediction capabilities will help investors uncover greater opportunities, and we look forward to continuing to apply AI to help investors achieve their goals.”