Is Life Good With LG’s New AI-powered Fund?

Liam Gibson


Artificial intelligence (AI) buzz has created most of this year's stock gains and driven valuations of select tech companies to new heights. 

Yet, as use cases multiply, an increasingly jumbled cast of corporate characters is joining the AI gold rush.  

Now, LG, the South Korean brand most famous for home appliances, is bringing its technological edge to try its hand at investment products.

Partnering up with ETF manager Qraft Technologies, LG is launching an AI-powered exchange-traded fund (ETF). The aptly named LG Qraft AI-Powered US Large-Cap Core ETF (“LQAI”) began trading on the New York Stock Exchange (NYSE) on Tuesday, November 7. 

LQAI leverages a proprietary LG forecasting algorithm to optimize allocation on 100 large US companies. It adjusts its holdings every four weeks in an effort to outperform the S&P 500.

LG is in an exploratory phase, testing what AI can do for its business. One internal division of the conglomerate, LG AI Research, has been applying AI to everything from market forecasting to materials purchasing. 

Now, with Qraft's help, LG is dipping its toe into financial markets. Qraft already manages at least two other AI-enhanced funds. 

“We don't have a financial business in our portfolio…we are trying to test the waters now,” LG AI Research's Young Choi told the Financial Times.  

LG is not alone. Its push reflects a broadening of the AI revolution. 

“You have the Magnificent Seven … and that's where you saw the market driven by those seven names in the first half of the year,” Jon Maier, Global X ETFs chief investment officer, recently told CNBC, (the “Seven” refers to AI-focused tech stocks including Microsoft, Nvidia, and others).

“But what you are seeing is every single company in talking about AI and how to effectively use AI,” he added.

This new “algo-fund” is driven by a deep neural network that will analyze macro variables, fundamental data, and market trends at superhuman levels.

The co-managers claim it will “seek patterns and signals that may be challenging for humans to identify at that speed and scale.”

Even if it can best human investors, AI might not necessarily outperform the market. Investors should be wary of becoming too enamored with the promises of emergent tech just yet.

According to Morningstar, 13 ETFs already use AI to optimize their allocation process, yet only two have outperformed broad market indexes.

LQAI comes with an expense ratio of 0.75 percent.

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