AI-Powered ETF Sponsor Take Precautions Against Over-Dependence On Mood

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The new VanEck Vectors Social Sentiment ETF (BUZZ) has drawn a lot of attention since it was launched a few weeks ago. Sponsored by internet celebrity and Barstool Sports founder Dave Portnoy, the ETF invests in US large-cap stocks with the highest levels of positive social sentiment and optimistic investor perceptions.

However, Chris Natividad, co-founder and CIO of EquBot, an AI-powered ETF platform, cautions against over-reliance on social sentiment as an investment signal. EquBot’s stock ETF uses IBM Corp.’s Watson artificial intelligence technology to select several dozen stocks that have the potential to beat the market. It analyzes data on thousands of stocks for up to 10 years, including market sentiment, regulatory filings, news articles, and social media posts. But Natividad says there is some misunderstanding about investing in social feelings, including a time hiatus.

“Sentiment scores can be misleading as there are two sides to every coin,” he said in a statement. “What is portrayed as a positive event for one group can mean a disaster for other market participants. To expect that algorithms that rely solely on these sentiment readings will determine the direction of trade and the projected effects will be consistently correct is too much to expect.

“Certain mood values ​​are ‘sticky’, while others can shift by the hour. The who, what, where, when, and how of the data used can affect the likelihood of future price increases. Just as funds can focus on technology or capitalization size, we view sentimental funds as another such filter, a filter that can underperform significantly over time when compared to other single-factor approaches. “

The BUZZ ETF has already raised more than $ 500 million in assets, according to published reports, indicating a change in the way investors perceive brand new ETFs. Previously, according to Bloomberg, ETF investors shied away from new funds and instead looked for scalability, track record, and widespread adoption. But that’s changing. “Suddenly, newcomers are luring big bucks right from the start with exchange-traded funds designed to surf the trends loved by the day-trading masses,” says Bloomberg.

BUZZ announced its first realignment this week, introducing 11 new stocks and removing 11 stocks due to investor sentiment. Some of the new stocks include Costco, Verizon, and Dropbox, while the stocks that have booted include BlackRock, Visa, and Starbucks.

Wall Street is warming up on cryptos

The wirehouses have primarily stayed away from cryptocurrencies – many do not allow the advisors to recommend the products to customers. However, this trend could be reversed. Bloomberg reported this week that Morgan Stanley will offer high net worth clients access to three funds that will allow Bitcoin ownership. Galaxy Digital operates two of the funds, and the third is overseen by FS Investments and NYDIG, according to Bloomberg.

Only high net worth clients with “aggressive risk tolerance” and at least $ 2 million held by the New York-based company have access to the funds.

Meanwhile, asset managers are seeking approval for the first Bitcoin fund, Bloomberg reports. At least four companies now have live applications for an ETF tracking the largest cryptocurrency, and WisdomTree Investments joined their ranks late last week. VanEck Associates Corp., NYDIG Asset Management and Valkyrie Digital Assets were the names that were already in the running. However, this isn’t the first time asset managers claim to be close to SEC approval for crypto funds only to see the commission send them back to the drawing board.

Morningstar: ARK strikes way above its weight

ARK ETF Trust has raised over $ 36 billion in new assets in the past 12 months, representing an organic growth rate of 1,024%. This is based on new fund flow data from Morningstar. The fund family led by Cathie Wood raised US $ 8 billion in February alone, the fifth highest sum of all fund families.

However, the research shop says that with just seven total funds and total assets of $ 51 billion, ARK is well above its weight. “It can be more difficult for the shop to repeat its success with a significantly larger asset base,” Morningstar said in its report.

Overall, long-term mutual funds and ETFs raised a record $ 144 billion in February, the largest since January 2018, when inflows were $ 132 billion.

U.S. equity funds grossed more than $ 37 billion during the month, but these funds have seen more than $ 199 billion in outflows in the past 12 months. Money flowed into categories that could survive an inflationary environment, such as: B. Basket of commodities and inflation-linked bonds.

T. Rowes First Impact Fund

T. Rowe Price launched its first Impact Fund that focuses on the global environment and social justice. T. Rowe Price’s actively managed Global Impact Equity Fund will seek out companies that have a positive impact on climate and resources, social justice and quality of life, and sustainable innovation. Companies that fail to meet their mandate will be excluded, including fossil fuels, tobacco, gambling and for-profit prisons.

It is managed by Hari Balkrishna and has a net expense ratio of 79 basis points and a minimum of $ 1 million for I-shares.

Hartford is committed to longevity

The Hartford Funds have launched a new ETF that aims to capitalize on the growth of the aging population and the purchasing power of this population. The Hartford Longevity Economy ETF (HLGE) will invest in sectors that should benefit from longevity, including communications services, healthcare and information technology.

“HLGE is designed to invest in companies belonging to industries that provide goods and services that reflect longevity economics issues, including on-the-spot aging and home remodeling, working longer hours, performance health and comfort, maintaining social connections , financial freedom, mobility and human improvement, and leisure and entertainment, ”says Hartford. It has an expense ratio of 44 basis points.

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