Specialist wealth manager Van Eck is launching an international equity exchange-traded fund (ETF) using an artificial intelligence (AI)-generated index as the basis for its portfolio holding.
The VanEck Dynamic International Equity ETF, trading under the Australian Securities Exchange ticker GOAT, will track the Akros Enhanced World ex Australia Index and will be the country’s first offering of its kind using AI to select global stocks.
The index starts with a ‘blank slate’ and finds stock opportunities through discovering, testing and validating investment signals across international markets using AI.
The model scores around 1200 of the world’s largest developed-market companies across more than 10,000 organisation signals and selects 150 firms with the highest assessed probability of outperformance.
According to VanEck, the model has the capacity to retire signals that lose predictive power and replace them with new ones, resulting in a dynamic international equity portfolio.
“The industrialisation of alpha is underway and it will be as consequential for asset management as indexing was in the 1970s,” VanEck Asia-Pacific chief executive Arian Neiron said.
Neiron indicated the benefit of incorporating AI is the fact it does not get “anchored” or “emotional” and is not faced with career risk that may prevent it from acting early.
“What was once the exclusive preserve of multi-billion-dollar quant shops with floors of PhDs is now accessible to every Australian with a brokerage account,” he noted.
“That is not an incremental improvement. That is a structural reordering of who gets access to intelligence and on what terms.”
A simulated track record for the Akros Enhanced World ex Australia Index, which was developed in partnership with VanEck and Seoul-based AI and quant index specialist Akros Technologies, has the index generating a return of 12.63 per cent a year since July 2005. That compares to the actual 9.62 per cent annual performance of the MSCI World ex Australia Index.
“What is compelling about the simulated record is not just the return premium, it is where that premium was earned. The strategy’s strongest relative performance has come in stressed, weak-cycle conditions,” Neiron explained.
The VanEck Dynamic International Equity ETF will be made available to investors on 20 July.
