AI and BIG data


Global X lists AI and big data ETF

Global X, the thematic ETF specialist that was recently acquired by Mirae, is listing a new big data and AI ETF. The Global X Future Analytics Tech ETF (AIQ) will track companies that are likely to “benefit from the further development and [use] of artificial intelligence … [and] provide hardware which facilitates the use of artificial intelligence for the analysis of big data,” the prospectus says.

To be chosen in the index, companies must have a market cap of $500 million and be listed in a developed country or China. AIQ then puts companies in one of two categories:

  1. AI and big data developers. This includes companies that build AI, companies in big data and companies in cloud computing.
  2. AI and big data hardware companies. This includes companies that make semiconductors, memory chips, graphics cards, and other computer hardware. It may also include quantum computing, the prospectus indicates.

To be included in the index, the companies must fit in one of the above categories. Whether companies fit in these categories is judged “based on [an] analysis of public filings, products and services, official company statements and other information”, by the index provider, the prospectus says.

Companies are then ranked on how well they fit in these categories, with only the most highly ranked being included. The index will be weighted by market cap.


Analysis – a three legged tech ETF 

When Amplify listed its blockchain ETF (BLOK) critics, including this one, suggested it was just a high-priced tech ETF in disguise. BLOK’s stock selection method for blockchain companies was so vague that it allowed companies that had merely expressed an interest in blockchain to be included in a blockchain index. It even allowed companies that were partnered with another company that had expressed interest in blockchain to be included in the index. So out of place did the ETF look, that Amplify backed down and renamed its Blockchain BLOK the “Amplify Transformational Data Sharing ETF”.

One wonders if something similar is happening here with AIQ. Only a very stretched definition of “artificial intelligence” would include graphics cards and semiconductor manufacturers. And when the prospectus reaches for quantum computing (when – if ever – it’s commercially viable; when – if ever – it actually exists) some from a tech background might smell that something is not quite right. Global X has had more sensitive antennae than almost any ETF issuer for what the retail market in the US will gobble up. They’ve seen success with BOTZ and LIT based on their brilliant reading of the retail zeitgeist. Yet with AIQ, one suspects they may have missed the mark. 


WisdomTree lists CoCo bond and put-write ETFs

WisdomTree is listing two new ETFs that promise to add colour to the European alternative ETF space. They are:

  • WisdomTree AT1 CoCo Bond UCITS ETF (COCB, CCBO)
  • WisdomTree CBOE S&P 500 PutWrite UCITS ETF (PUTW, PUTS)

COCB will track an index of what are known as contingent convertibles bonds (CoCo). CoCos are a funny thing and straddle the grey line between equity and debt. On the surface, they are bonds, as they pay an annual coupon. But they sit on tier-1 (and sometimes tier-2) of banks’ capital structures – alongside equity, meaning they get paid out last. They’re funny also in that if they fall to a certain price they get converted into equity. They have come to the front since Basel III forced banks to boost their tier-1 capital and force markets to absorb risk posed by banks balance sheets. (Index factsheet here.)

PUTW exists already in the US under the same ticker, where it has $203m assets under management. It tracks an S&P 500 index that builds in an options strategy. By selling call options on the S&P stocks the fund owns, PUTW tries to create an additional stream of revenue while lowering potential risk.