On Thursday, Exchange Traded Concepts (ETC) announced that, in conjunction with QRAFT Technologies, it is launching the QRAFT AI-Enhanced U.S. Next Value ETF (NYSE: NVQ). The Fund began trading on the New York Stock Exchange on December 3, 2020.
“We are proud to expand our relationship with Qraft by offering a fourth ETF with the firm,” said J. Garrett Stevens, CEO of Exchange Traded Concepts. ETC and Qraft launched the Qraft AI-Enhanced U.S. Large Cap ETF (QRFT) and the Qraft AI-Enhanced U.S. Large Cap Momentum ETF (AMOM) in 2019 and the Qraft AI-Enhanced U.S. High Dividend ETF (HDIV) in 2020.
NVQ is an actively managed ETF that aims to provide exposure to value through the use of artificial intelligence (AI).
Measuring The QRAFT
“After years of underperformance, we believe that value is poised for a comeback,” noted Hyungsik Kim, CEO of Qraft Technologies. “In addition to traditional valuation metrics, NVQ will utilize AI technology to measure a company’s intangible assets, including items such as research & development, marketing costs, and intellectual property,” Mr. Kim went on to note.
As our economy shifts from “brick and mortar” assets to more digital and knowledge-based capital, intangibles are becoming increasingly crucial for valuation measures. With Qraft AI, the aim is to properly measure a company’s book value by incorporating intangible assets. The Fund will then invest in companies with a higher adjusted book value ratio relative to its market value. This may help investors discern the correct value of a company.
One reason why value investors don’t include intangibles is that current accounting measures don’t support it. Another reason is that measuring intangibles can be notoriously tricky as there is no clear boundary between sectors. For example, a biotech company may not have the same branding budget as a consumer goods company. With AI technology, however, measuring intangibles is not just possible, but it may also detect the differences between sectors accurately.
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