Let this newly-launched AI run your investments for you

We knew it was coming, but artificial intelligence has now officially penetrated Canada’s wealth management landscape.

Horizons ETF Management (Canada) Inc., a Toronto-based financial services company, is launching the country’s first-ever exchange-traded fund that will be driven exclusively by artificial intelligence. That essentially means instead of a person, a computer program will now be deciding what basket of global stocks will get you the best returns in your portfolio.

Horizons Active A.I. Global Equity ETF which will be trading under the ticker MIND is programmed to filter a group of five to 20 ETFs that it calculates will perform well, from a portfolio of 32 global equity ETFs.

“The intention is to let the system MIND to do all of the allocation of stocks, so long as it is following a strategy and restrictions parameters that were programmed into its system,” said Steve Hawkins, President and co-CEO of Horizons ETFs.

“The AI system will execute trades, so we are essentially letting the system make the stock-picking decisions, but we at Horizons will do a monthly overlay, just to check in on performance,” Hawkins told VICE Money.

South Korea-based Mirae Asset Management, which is the technical subadviser to MIND, has designed the system to rebalance on a monthly basis. Basically, MIND might not hold one basket of stocks for a long period of time. If that basket isn’t performing according to the parameters set by Mirae and Horizons, MIND will reset itself at the start of the next 30 day cycle.

“Despite Canadian investors slowly overcoming their home bias and wanting to invest in international markets, the expertise required for a global strategy can be costly and time-consuming for the average investor to pursue,” said Hawkins. “In our view, an A.I. system, as an active manager in this space, significantly streamlines the process and makes buying a whole world of ETFs as easy as trading a single stock on an exchange.”

While MIND is the first ETF in Canada that is controlled entirely by AI, the financial sector does already employ the use of robots for investment-related tasks like scanning stock patterns, or using chatbots to assist customers in online banking.

But the use of AI is limited particularly in the asset and wealth management sector possibly because investors tend to prefer to deal with an actual person when it comes to managing their money. According to a recent PriceWaterhouse-Coopers report, only 26 percent of the wealth management sector in the U.S. uses machine algorithms to determine investments — 76 percent of the sector still relies on human judgement.

Hawkins argues that human judgement is laced in bias, and the beauty of AI as a stock-picker is that it is incapable of making investment decisions driven by emotions. “We have gone through rigorous testing and we’ve put in 10 years worth of data into our model. We really think it will do a better job in the long-run than a human portfolio manager.”

So will this this negate the role of a wealth manager altogether? Not really, Hawkins says.

“In a down market, there is nothing more that investors want than the comfort of hearing that warm voice, reassuring them that everything will be alright.”

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