Wisdom Tree 's New AI Strategy Assists With Exchange Traded Funds
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Artificial intelligence was once purely the stuff of science fiction. We all grew up reading books and watching movies featuring sentient robots and computers, and imagined a future where such intelligent machines may be possible, if not commonplace.
That time now feels like it's finally arriving, and, while the technology still has a long way to go before it could pass the Turing Test, we are seeing the early stages of artificial intelligence being introduced into many walks of life and industry.
Perhaps unsurprisingly, the asset and wealth management world is looking for ways to make the most of the investment opportunities provided by this exciting new technology.
Wisdom Tree
A relatively new player in the asset management industry, Wisdom Tree only launched its first ETFs back in 2006. As you might expect from a modern and tech-savvy organization such as this, it is now ready to take advantage of the opportunities presented by AI technology.
To this end, Wisdom Tree has created a unique partnership with Nasdaq and the Consumer Technology Association (CTA) to launch a brand-new ETF which will allow forward-thinking investors access to the artificial intelligence technology sector so they can start leveraging the potential of related liquid and cost-effective assets.
"We are delighted to partner with Nasdaq and CTA, who are experts in AI and technology markets," said WisdomTree Head of Research in Europe, Christopher Gannatti. "To capture the full economic value of AI we place companies in three categories; Engagers, Enablers, and Enhancers. When investors think of what this can bring to a portfolio, they should be thinking over a long-time horizon and about how advances like autonomously driven cars, a digital workforce, mass facial recognition and other applications of intelligent machines could change the world."
Launched on 5th December 2018, the WisdomTree Artificial Intelligence UCITS ETF was listed on the London Stock Exchange with a total expense ratio (TER) of 0.40% and will track the Nasdaq CTA Artificial Intelligence index. The ETF is comprised of 52 securities which have been carefully vetted and selected from companies which are poised to make the greatest leaps forward in the development of AI technology - whether as enhancers, enablers, or engagers.
Engagers make up 50% of the index and are defined as companies providing AI-powered products and services. Enablers total 40% of the index and are defined as companies whose core products and services enable AI, including component manufacturers and platform providers powering AI processes. Finally, enhancers make up just 10% of the index and are businesses who are involved in AI, but the product is not a core part of their revenue.
To be considered for inclusion in the WisdomTree Artificial Intelligence UCITS ETF, companies must meet or exceed very strict criteria:
- Define Universe: Companies must be listed on a set of recognized global stock exchanges and satisfy minimum liquidity criteria and market capitalization criteria to be included in the index.
- Identify and Classify: Companies are identified as belonging to the AI value chain and classified into the following categories: Enhancers, Enablers, and Engagers.
- Determine AI Exposure: The AI exposure for each individual stock is investigated and scored.
- Top Selection: Only companies with the top 15 scores in each category (Enhancers, Enablers, and Engagers) are selected for inclusion, and their weight is allocated evenly in each category.
"AI is one of the key 'ingredient technologies' over the next decade - deployed everywhere from factory floors and retail stores to banks and insurance offices, creating new opportunities," said Senior Director of Business Intelligence and Research for CTA, Jack Cutts. "We'll see this play out in January at CES 2019 - the most influential tech event in the world - where AI will be a dominant theme, showcasing the massive potential AI has to change our lives for the better. We're excited to partner with Nasdaq and WisdomTree to make AI investible."
Final Thoughts
Artificial intelligence technology is certain to become ever more ubiquitous as time marches on. It will remain to be seen whether its sophistication will ever reach the heights envisaged by science fiction writers. But in the meantime, it's great to see companies such as Wisdom Tree looking for ways to boost the technology through investment.
You can hear Wisdom Tree's Head of Advisor Innovation, Brad Shepherd, speak at Digital Wealth 2019, taking place in May, venue TBC.
Download the agenda today for more information and insights.