A new ETF designed to track the potential for transformation represented by artificial intelligence (AI) has been launched by WisdomTree.
The WisdomTree Artificial Intelligence UCITS ETF has been conceived in conjunction with both Nasdaq and the Consumer technology Association (CTA) and will provide what the fund manager says will be "unique exposure" to the "exponential megatrend" of AI technology.
It will be listed on the London Stock Exchange and comes with a TER of 0.40%.
Christopher Gannatti, WisdomTree head of research in Europe said: "We are delighted to partner with Nasdaq and CTA, who are experts in AI and technology markets. We have worked together, leveraging our combined expertise, to re-define the AI investment landscape."
The capture the full economic value of AI, the fund has been designed ot categorise companies by whether they are an engager, an enabler or an enhancer.
"When investors think of what this can bring to a portfolio, they should be thinking over a long-time horizon and about how advances like autonomously driven cars, a digital workforce, mass facial recognition and other applications of intelligent machines could change the world," Gannatti added.
The fund is the result of a year-long collaboration between WisdowmTree, Nasdaq and the CTA.
The fund broadly represents the upstream and midstream parts of the AI value chain and so balances diversification with a focused exposure on those parts of the AI value chain that stand to gain the most from growth in the AI market.
WisdomTree said there is no commonly accepted classification system related to AI companies, so the selection of index portfolio constituents is conducted by experts with deep familiarity of the AI value chain and the technology markets more broadly.
"AI is one of the key 'ingredient technologies' over the next decade - deployed everywhere from factory floors and retail stores to banks and insurance offices, creating new opportunities," said Jack Cutts, senior director of business intelligence and research at the CTA.
"We'll see this play out in January at CES 2019 - the most influential tech event in the world - where AI will be a dominant theme, showcasing the massive potential AI has to change our lives for the better. We're excited to partner with Nasdaq and WisdomTree to make AI investible."
The WisdomTree Artificial Intelligence UCITS ETF tracks the Nasdaq CTA Artificial Intelligence Index. The Index is currently comprised of 52 constituents globally with stringent eligibility criteria:
Define Universe: Companies must be listed on a set of recognized global stock exchanges and satisfy minimum liquidity criteria and market capitalization criteria to be included in the index.
Identify and Classify: Companies are identified as belonging to the AI value
chain and classified into the following categories: Enhancers, Enables and Engagers (see below for definitions.)
Determine AI Exposure: The AI exposure for each individual stock is investigated and scored.
Top Selection: Only companies with the top 15 scores in each category (Enhancers, Enablers and Engagers) are selected for inclusion, and their weight is allocated evenly in each category.
Allocate Weight: In total Engagers comprise 50% of index exposure, Enablers comprise 40%, and Enhancers comprise 10% of index exposure.