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Lyxor looks to introduce AI in ETF products

Lyxor looks to introduce AI in ETF products

More companies are likely to launch ETF products that use Artificial Intelligence (AI) in the coming years, according to Adam Laird, head of the ETF Strategy for Northern Europe at Lyxor.

Mr Laird said his firm is looking at launching such a product but at the moment he has concerns about the methods of inputting the data to be processed by the machine.

Choosing and selecting data to make available to the machine is subject to human error or human prejudices in deciding which information to make part of the process, Mr Laird said.

But he added the technology is likely to improve further and allow machines to process more data, facilitating growth.

But he cautioned such products may resemble the sort of “black box” quantitative funds that were popular prior to the financial crisis, but performed poorly during those times of market strife.

Mr Laird was commenting in the context of veteran US investor Jim Rogers launching an ETF product that will use machine learning to perform asset allocation.

Alastair Cunningham, financial planning director at Wingate Financial Planning in Caterham, said an AI-led ETF "seems like a gimmick".

He said: "For example how can they argue it uses an AI to determine every investment decision yet the multi-decade expertise of Mr Rogers would give greater insight?

"Computers are already heavily involved in trading, so there is nothing new there. Why that would be desirable for most investors is beyond me. Just because an AI is doing something doesn’t make it smarter."

david.thorpe@ft.com