Is AI Destined to Replace Fund Managers?
In this episode of TechTalk, we talk about the debut of the world’s first ETF powered by artificial intelligence (AI). We discuss the technology behind it, if it impacts a fund’s expense ratio and, most importantly, how it’s performing.
Dave Plaskow: Hello and welcome to EisnerAmper’s technology podcast series. With more than 500 technology clients, we’re always interested in the latest industry trends and developments, as well as any related business and accounting opportunities and challenges. Today’s topic is robot managed mutual funds. I’m your host Dave Plaskow and with us today is Dave Katz, senior manager in EisnerAmper’s technology and life sciences practice. It’s another episode of The Dave & Dave Show. Dave, welcome and thanks for being here.
Dave Katz: Always good to be here Dave.
DP: I like this topic – it seems really interesting to me. But are we now moving one step closer to robots taking over the world?
DK: It sure does seem that way sometimes. In this case, San Francisco-based EquBot LLC debuted the world’s first ETF powered by artificial intelligence. It’s the AI Powered Equity ETF. It’s on the New York Stock Exchange under ticker AIEQ.
DP: Great. And what’s the technology behind this?
DK:Using the data processing power of IBM’s Watson, the fund ranks investment opportunities by analyzing more than one million pieces of information daily such as economic data, consumer trends, social media posts, and world and company-specific news, and it identifies those equities with the greatest potential for appreciation. The technology builds predictive models on some 6,000 companies and then derives a portfolio of approximately 70 U.S. equities.
DP: Okay. But this isn’t an entirely new concept, is it?
DK:No, computer algorithms have been examining trading patterns in stocks for quite a while now.
DP:What’s different here?
DK:The AI uses machine learning so it can actually learn without the assistance of people.
DP: Wow. Now, with all the automation behind this, is this going to lower the price of funds?
DK:Somewhat. The AI-powered equity ETF has an annual expense ratio of about 0.75%. That’s a little higher than the average passive ETF, but for actively traded funds, such as this, it’s a little cheaper.
DP: Now the real question, how’s the fund doing?DK:Yes, that’s what everyone wants to know. In its first week of trading, the fund was up 1%. During that same time period, the S&P 500 index was up 0.5%, so score this one for the robots. But the fund only has about $7 million in assets. Should it be successful, we’ll obviously see that number grow.
DP: We’re seeing in a lot of media reports that artificial intelligence may put quite a few people across a variety of sectors out of work. Is this now one step closer to putting flesh-and-blood fund managers out of business?
DK:Certainly the decrease in actively managed funds and increase in index and target date funds have been a challenge for the fund manager workforce. And while AI will replace certain positions, I think there will always be a need for highly skilled professionals to provide personal services to clients – the key word being “personal.”
DP: So we’ll have to keep our eyes open and see if this starts going more mainstream, moving into the Fidelity and Vanguards of the world.
DK:Absolutely.
DP: Well, Dave, thanks for your expertise and great insight.
DK:Thank you.
DP: And thank you for listening to The Dave & Dave Show, as part of the EisnerAmper podcast series. Visit EisnerAmper.com for more information on this, and a host of other topics. And join us for our next EisnerAmper podcast, when we get down to business.
EisnerAmper’s Technology and Life Sciences practice talks about the Theranos dissolution, and what took them from biotech unicorn to dissolution. Investors must use due diligence and consider a company's internal controls before investing in companies with high valuations.
EisnerAmper's Technology podcast series discusses the proposed New York City Council cap on the number of ridesharing vehicles such as Lyft and Uber in Manhattan to ease congestion. How will this cap change Uber's valuation, and what is the economic hit to the taxi industry?
This episode of the Dave & Dave Show discusses new cryptocurrency technology from the fintech startup company Circle, called USD Coin. This cryptocurrency ties itself to the U.S. Dollar, therefore eliminates some volatility that comes with crypto mining and Bitcoin.
TechTalk takes a look at a tech startup, Aerobotics, that is using drones to help farmers in South Africa. This podcast discusses how the drones help South African farmers, how the US government is using drones and how MIT is making micro drones.
TechTalk discusses a new 3d printed community proposed in El Salvador by the nonprofit New Story and ICON construction. Icon and New Story debuted their 3D printed house at the Austin South by Southwest festival. Issues discussed include cybersecurity and valuation.
Life Science Partner Dave Katz discusses the new 23andMe DNA testing kit for breast cancer BRCA1 and BRCA2 gene mutations approved by the FDA, and what it means for the biotech industry. The FDA approved 23andMe DNA breast cancer test increases access to health care information.
TechTalk examines Jeff Bezos' new possible Amazon facility cities of Austin, New York City, Washington DC and Atlanta, with Atlanta being Dave Katz' first pick. They also discuss Amazon Go, and Amazon's healthcare initiative with Berkshire Hathaway.
EisnerAmper’s technology podcast discusses the first FDA approved EKG band for the Apple Watch. Dave Katz of the Technology and Life Sciences practice discuses these new medical devices, their use of artificial intelligence and the cybersecurity issues surrounding them.
EisnerAmper’s technology podcast discusses related business and accounting opportunities with the senior manager in its Technology and Life Sciences practice about Uber, drones, internet providers and net neutrality, IPOs, AI and the R&D credit that may expire next year.
It was a milestone when Facebook implemented facial recognition software in 2010. The iPhone X has put a renewed spotlight on facial recognition technology. EisnerAmper’s Technology and Life Sciences Manager discusses security issues surrounding facial recognition technology.
Supersonic air travel is coming back with a boom. What does today’s market look like for supersonic air travel and how are start-ups such as Boom and Aerion navigating the many challenges? Also discussed is mergers and acquisitions and the need for valuations.
Is iRobot’s Roomba automated vacuum collecting consumer data that will be offered to technology companies to enhance internet of things devices? Here is what information is being collected, potential data privacy and security issues, and iRobot’s response to consumer concerns.
Tesla has received a significant investment from Chinese tech giant Tencent. This podcast discusses what Tesla plans to do with the cash infusion, Tencent’s ownership stake and how this could help both companies enter the highly coveted self-driving car market.
Amazon’s CEO Jeff Bazos just passed Warren Buffet to become the second wealthiest person on the planet. In Technology M&A news, Amazon competes with Alibaba by buying Dubai based Souq in a battle over E-commerce in the middle east, as reported by EisnerAmper’s Life Sciences Practice.
With retiring baby boomers some of the fastest growing jobs in technology attracting tech talent are located in New York City, San Francisco, Austin and Seattle. Tech talent can come from non-traditional backgrounds and there is strong hiring growth in hubs such as New York City.
Amazon Go wants to streamline your grocery shopping. This podcast discusses Amazon’s plan to use 'Just Walk Out Technology' to change food shopping. A look at the technology behind Amazon Go, potential speedbumps and what it could mean for bricks-and-mortar grocery chains.
David in EisnerAmper’s Technology and Life Sciences Practice, gives a “state of the union” on self-driving cars, an overview of Uber’s unique experiment in Pittsburgh, and a glimpse of what we can expect in the marketplace over the next few years.
This episode of TechTalk we discuss the commercial real estate shortage for the nation’s biotech sector. Life science and biotech companies in hubs like Boston and San Fran are seeking out real estate in the suburbs in order to afford space to expand their businesses.
This Life Sciences and Technology podcast talks about the space-age technology called the Hyperloop. The Hyperloop could take people from LA to San Francisco in 35 minutes, and was originally conceived by Elon Musk. Hyperloop One is the first company to develop the technology.
David discusses the commercial drone market, including how the FAA will regulate pilot licenses, drone use in real estate, Amazon's use of drones for future deliveries, the VC market and M&A strategies for companies interested in investing in drone technology.
David discusses virtual reality including Facebook's acquisition of Oculus, HTC's Vive and revenue recognition that comes from virtual reality technology. HTC has created the Vive X Fund and Facebook has created a similar fund to help develop virtual reality software.
