Korean tech company Qraft is listing two actively managed “AI-assisted” quant funds with the help of white labeller Exchange Traded Concepts.
QRAFT AI-Enhanced U.S. Large Cap ETF (QRFT)
QRAFT AI-Enhanced U.S. Large Cap Momentum ETF (AMOM)
QRFT should perhaps have been called a multi-factor ETF. It will pick US large caps based on five factors – quality, value, size, low risk and momentum. Exposure to these factors will be measured over the last five years by a “proprietary artificial intelligence… process that extracts patterns from analyzing data,” the prospectus says. The fund is expected to hold roughly 300 companies and have a heavy healthcare sector tilt.
AMOM works in a similar way but is only interested in the momentum factor. It will hold a more concentrated portfolio of 50 stocks and will likely have a tech sector tilt.
In both cases Exchange Traded Concepts’ portfolio managers have final say over whether stocks the algorithm likes go in the fund. This means the fund has an active overlay.
The filing did not not include expense ratios.
Analysis – what happened to the deal with Mirae Asset?
Qraft is not new to the North American ETF industry. They are the mind behind the Horizons Active AI Global Equity ETF (MIND), which is listed in Canada. MIND, which has $12 million in assets, is a "fund of funds" that invests in other ETFs based on the algorithm’s reading of the underlying indexes.
What matters here, is that for the Canadian listing, Qraft worked with Mirae Asset via its Canadian subsidiary Horizons. Mirae, like Qraft, is a Korean company. According to reports in the Korean press, Qraft and Mirae had hatched a deal to list ETFs together in the US as well as Canada. In the US, press reports said they'd do so under Mirae's Global X subsidiary.
Yet to judge by today's listings, which are partnered with ETC not Mirae, that original deal has fallen through. So what happened? Did Mirae bail after MIND lagged on assets? Was a press release put out prematurely? Or were Qraft offered a better deal from ETC? We don't know, but we'd like to find out.