Switzerland’s Pictet Asset Management has launched four active ETFs whose stock selection will be entirely driven by artificial intelligence (AI).
The “enhanced equity” funds will use a proprietary AI model to interpret a vast amount of data points rather than plugging artificial intelligence into an existing quantitative analysis system.
The suite of AI enhanced UCITS ETFs will cover European Equity (PQEU), US Equity (PQUS), World Equity (PQWD) and, following close on the heels of JP Morgan, a World excluding US exchange-traded fund (PQWX).
The four ETFs will aim to beat their respective MSCI benchmarks by 1-1.5% a year after charges whilst tracking the indices closely. Total expense ratios are set at 0.25%. They are listed on Deutsche Boerse and Euronext with the London Stock Exchange and Swiss SIX Exchange expected to follow.
David Wright, Pictet’s head of quantitative investments, said: “Investors often believe improving returns means seeking new or exotic sources of outperformance. In reality, it is often about navigating the same investment universe and data more intelligently. This is where AI excels – it can spot complex patterns that humans cannot see.”
Pictet’s move into active ETFs follows the launch in March 2024 of the Pictet Quest AI-Driven Global Equities UCITS fund. It raised more than $3bn and returned 50% in US dollar terms, beating the MSCI World Index which returned 45.9%.
Our view
David Batchelor, senior analyst at QuotedData, said: “Pictet’s launch is another sign that active ETFs are moving beyond traditional factor tilts and into more data-led stock selection. The target outperformance of 1–1.5% a year is modest, but that is arguably the point: these funds are designed to stay close to their MSCI benchmarks while seeking incremental gains after costs. The use of AI as the core stock-picking engine will attract attention, particularly given the strong early record of Pictet’s existing AI-driven UCITS fund. However, investors will still need to judge these ETFs on delivery over time, not just the sophistication of the model. As with other enhanced equity strategies, the key question is whether the approach can consistently add value across different market conditions while keeping tracking error and costs under control”.
Stay a step ahead. Our daily newsletter brings you the latest on investment trusts and active ETFs. Subscribe here.
