German asset manager LAIQON has entered the European ETF market with an actively managed equity strategy that uses artificial intelligence to help select and weight stocks.
The LAIQON European Equity AI Optimized Active UCITS ETF began trading on Xetra on 12 August under the ticker LQEU, having been developed in partnership with Amundi. The accumulating fund has an ongoing charge of 0.49% and is LAIQON’s first ETF.
The ETF uses AI as part of its investment process. LAIQON’s proprietary LAIC Advisor model analyses data to produce probability-based return and risk forecasts for European equities, which are then subject to a qualitative review by the portfolio management team before the final portfolio is constructed.
The ETF invests in large and mid-cap companies across 15 developed European markets. Its investment universe is based on the MSCI Europe Index, while the MSCI Europe Screened Index is used as its benchmark. The portfolio is expected to hold between 100 and 150 stocks, with positions able to be adjusted daily.
LAIQON is targeting a tracking error of between 2% and 5% a year, giving the strategy scope to deviate from the benchmark while retaining a relatively diversified European equity portfolio.
Europe was selected for the first strategy as changes in areas including energy, digitalisation and defence are creating greater differentiation between companies, which should provide opportunities for active stock selection. LAIQON had €11bn of assets under management and administration at the end of May.
Amundi provides the ETF infrastructure through its ETF-as-a-Service platform, while LAIQON contributes the investment strategy and AI-driven portfolio process. LAIQON has said this ETF is intended to be the first in a wider range applying the same approach to other investment regions.
Our view
David Batchelor, senior analyst at QuotedData, said: “As is increasingly common in the active ETF space, LAIQON is using AI technology to decide which stocks investors should own. The 2%-5% tracking-error target gives the model enough freedom for its decisions to have a meaningful impact, while the relatively broad portfolio should prevent it becoming an overly concentrated bet. Ultimately, though, investors will need to see whether those AI-driven tilts can consistently add enough value to justify a 0.49% fee over much cheaper passive European equity ETFs”.
