Active ETFs have had a big year so far in 2023 by several metrics. From institutional investor interest to advisors planning to up allocations, active strategies have grown in popularity. With their ability to invest nimbly and lean on managerial expertise, that appeal makes some sense. How, then, do active ETFs engage with one of the biggest investing trends this year – AI? VettaFi’s AI Symposium explored combining active ETFs with AI Wednesday in a wide-ranging discussion.
The segment included insight from Spear Invest founder & CEO Ivana Delevska and BNY Mellon Investment Management head of secular pod Robert Zeuthen. Hosted by VettaFi vice chairman Tom Lydon, the group explored how active ETFs can stand out when engaging with artificial intelligence firms. With the global artificial intelligence market projected to grow from $150 billion in 2023 to $1.3 trillion in 2030, identifying the best active ETFs with AI is a priority.
See more: “Artificial Intelligence ETFs, or ETFs Powered by Artificial Intelligence?”
How BNY Mellon, Spear Invest See AI
For BNY Mellon’s side of things, the firm sees AI as early in its innovation cycle, per Zeuthen. Its managers see AI as potentially disruptive to multiple different industries, with its ETF the BNY Mellon Innovators ETF (BKIV), able to move between sectors.
“We like companies that are in the medical device area, companies like Align Technologies (ALGN),” Zeuthen said. “You may know this as the company that manufactures the Invisalign clear retainer.”
“This company is using AI to look at imaging to help patients understand when they should move to the next aligner,” Zeuthen added. “And in the future, it’s going to use AI to potentially detect the onset of early diseases.”
Delevska gave an example, meanwhile, of looking down the value chain in large and mid-caps exposed to AI. For example, Spear Invest wants to play the broadband side of AI development, with faster internet required for numerous industries to take full advantage of AI. That has led them to consider, for example, Marvell Technology (MRVL) for its broadband tech suite.
“We see a lot of winners and losers created by AI,” Delevska said. “So, when you’re looking at a passive strategy, you’re really getting a basket of both the winners and the losers.”
“This may perform okay over time, but you’re not going to see the signs of outperformance that you could if you just pick the winner, and that’s what we’re trying to do,” she added.
Consider Active ETFs With AI
For investors interested in active ETFs with AI, consider the BKIV and the Spear Alpha ETF (SPRX). BKIV launched this year and charges a 50 basis point (bps) fee to actively invest in innovative firms including AI-focused companies. SPRX launched in 2021 and actively invests in global thematic firms it expects to make technological breakthroughs in areas including AI.
SPRX uses a combination of top-down analysis and bottom-up research, while BKIV assesses firms’ R&D investment, intellectual property portfolio, market share, culture, and more. For investors looking for active ETFs with AI, consider the pair of SPRX and BKIV as notable options.
To view this session and others from the AI Symposium, register for the on-demand replay.
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