Trust the machines?

A computer can trounce a human chess master and solve complex mathematical calculations in seconds. Can it do a better job investing your money than a flesh-and-blood portfolio manager?

Investors willing to test that question can do so with a couple of exchange-traded funds, or ETFs, that leave the investment decisions to a computer’s so-called artificial intelligence, or AI.

ETF Managers Group and Ocean Capital Advisors launched an AI-powered fund last month dubbed the Rogers AI Global Macro ETF (BIKR) that invests primarily in single-country ETFs. The fund’s AI sifts through millions of data points from countries around the globe and uses what it learns to determine how best to allocate the fund’s holdings. (Humans carry out the trades, however.)

Does this approach work? Another AI fund launched last November by ETF Managers Group and Equbot shows some promise.

The fund, which is called the AI Powered Equity ETF (AEIQ), invests in a variety of U.S.-based companies and seeks to beat the returns of the S&P 500. So far, it’s getting it done. The ETF is up 8.1 per cent this year, while the S&P 500 has gained about 1.5 per cent.

Still, a track record of less than a year on a single fund isn’t nearly enough to gauge the merits of the AI approach. Also, like any fund, one should weigh potential gains This undated photo provided by ETF Managers Group shows Sam Masucci, founder and CEO of ETF Managers Group.

against the fund’s fees. At 75 basis points, AEIQ’s expense ratio is on the higher end of ETF fees, even if the AI is doing all the thinking. By comparison, Schwab’s US Broad Market ETF, which also invests in a broad swath of U.S. stocks, has an expense ratio of 3 basis points.

Sam Masucci, founder and CEO of ETF Managers Group, recently talked about his firm’s investment funds and why an AI fund manager might prove to be better at generating investment returns than the human variety. Answers have been edited for clarity and length.