For investors curious about cutting-edge technologies, smart systems like artificial intelligence (AI) and data analytics are extremely compelling. By allowing you to better analyze complex business operations, these technologies empower you to identify potentially prime investment opportunities and get ahead in today’s volatile market environment.
To learn more about algorithmic investing – and understand how it helps Viewpoints Financial Personality types uncover hidden investment opportunities – TIFIN Personality spoke with Ultra Blue Capital (UBC), an asset management firm that’s leading the charge in this area with the creation of the UBCB ETF.
TIFIN Personality: As technology continues to evolve, we’ve seen massive growth in the use of AI and data across industries, including within the investment space. Why are these tools becoming so popular?
UBC: As industries and economies become increasingly interconnected, innovation and technological advances are changing the face of many sectors. And consumer preferences are evolving by the day.
Because of this, we believe traditional spreadsheets are no longer sufficient for investment analyses. Today, for an analysis to be effective, it needs to capture high-frequency data – which is proliferating at an exponential rate – and it must be able to predict fundamentals in a constantly evolving market landscape. This is beyond the capability of conventional forecasting and static modeling.
TIFIN Personality: How does AI help mitigate these challenges?
UBC: AI, combined with data analytics, creates efficiencies and makes more accurate predictions that exceed the capability of human beings. By processing multi-dimensional data in near real-time, we believe it allows for better price discovery and fundamental predictions. Additionally, because AI is designed to self-learn and continuously improve, it’s incredibly agile – adopting new features and strategies both simultaneously and instantaneously.
AI is also scalable and is limitless in terms of the amount of data it can process. This allows it to easily expand the investment universe. Plus, beyond synthesizing data at an exponential rate, AI-driven investment is free of typical investors’ behavioral biases.
TIFIN Personality: Your ETF (NYSE:UBCB) is actively managed algorithmically. How does this approach work?
UBC: Active management and algorithmic investing go hand in hand and are more powerful when used together. That’s why all our investing strategies are built on three core pillars: data, AI/machine learning (ML), and portfolio management.
For data, we use factual, high-quality, multi-dimensional data with the highest possible frequency. We currently have over 1,000 unique data sources and process over a billion data points daily.
Next, we have AI/ML. Given the vast amount of data we process, we developed sophisticated in-house ML algorithms that let us proactively search for better investment opportunities.
Last, we have portfolio management. Active investing has always been an important part of investing and we believe it will play an even larger role for the foreseeable future due to macro-economic conditions and the fast-evolving industry landscape.
TIFIN Personality: Can you share an example of how your ETF uses algorithmic investing?
UBC: Our Algorithmic Fundamentals ETF, UBCB, is transparent and fully automated. Using near real-time data and taking advantage of our information processing edge, UBCB’s algorithms identify both short-term trading and long-term investment opportunities. Our algorithms seek to uncover opportunities revealed by sub-strategies such as fundamental momentum or opportunistic hedging.
TIFIN Personality: And how do you combine that approach with active management?
UBC: When it comes to portfolio management, we’re sector agnostic, so we aren’t constrained by any specific themes or investing styles. Our portfolio includes cyclical, secular, growth, and value equities while being agile in implementing new strategies.
It also focuses on businesses that form the backbone of our economy – large-cap companies with strong profitability and best predicted fundamentals across traditional and emerging industries.
We believe our AI/ML approach, together with our algorithmic insights, give us a distinct way to track complex large- and mega-cap companies in the digital age. By combining a multi-strategy approach with our information processing edge, we strongly believe we can identify the best investing opportunities in this era of exponential data growth.
Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Fund, please call (866) 465-2004 or visit our website at www.ubc-b.com. Read the prospectus or summary prospectus carefully before investing.
Investing involves risk. Principal loss is possible. The fund is new with no track record for investors to evaluate.
The Fund’s performance depends on the skill of the Adviser and proprietary Artificial Intelligence “AI”-driven algorithms, in evaluating, selecting, and monitoring the portfolio. The Fund bears the risk that the quantitative models will not be successful in determining the investments and weightings for the Fund. Models are subject to modifications.
The Fund is non-diversified and may take larger positions in a smaller number of securities or be concentrated a particular sector. The Fund’s value could be adversely impacted by factors affecting a limited number of investments than if it were more diversified. The Fund may or may not engage in hedging strategies, including options and short sales. Short sales risk could occur if the market price of a borrowed security increases so that a fund could theoretically suffer a potentially unlimited loss.
There can be no assurance that hedging strategies will be successful in avoiding losses and hedged positions may perform less favorably in generally rising markets than unhedged ones.