In a special edition of Behind the Ticker recorded at the UT CATT 2024 Global Analytics Conference, host Brad Roth moderated a panel discussion exploring the future of AI in finance. The panel brought together leading voices in the field: Kyle Wiggs, co-founder and CEO of UX Wealth Partners; Sudhir Holla, founder and CEO of MyStock DNA; and Tal Schwartz, founder of AI Funds. Together, they examined how artificial intelligence is revolutionizing portfolio management, addressing longstanding industry challenges, and opening up new possibilities for smarter investment strategies.
About Ai in Finance and UT CATT 2024 Global Analytics Conference
Kyle Wiggs highlighted the operational challenges and opportunities AI presents to financial advisors. He explained how UX Wealth Partners bridges the gap between sophisticated AI-driven strategies and practical implementation for end clients. By focusing on trading, billing, and reporting across multiple custodians and account structures, Wiggs emphasized the importance of scalability and efficiency in delivering cutting-edge solutions to the wealth management community. He also stressed that AI’s role should complement human advisors rather than replace them, describing the concept as “man and machine” working together to enhance outcomes.
Investment Strategy and Approach
Sudhir Holla brought a different perspective, emphasizing MyStock DNA’s philosophy of “winning by not losing.” He explained how their AI engine, Darwin, helps mitigate downside risk while managing large volumes of data and human emotions that often derail investment decisions. Holla introduced the concept of an “emotional risk frontier,” suggesting that AI could help create individualized portfolios tailored to each investor’s emotional tolerance for market volatility. His analogy of AI as a “self-driving car” for portfolios resonated, showcasing how the technology navigates complex market conditions while aiming for safety and efficiency.
Tal Schwartz provided insights into the quantitative and predictive power of AI in active portfolio management. He shared details about his AI engine, BAILA (Bayesian AI Learning Algorithm), which acts as both a macro strategist and portfolio optimizer. BAILA’s ability to identify market environments and adapt to changing conditions offers a smarter alternative to traditional active strategies. Schwartz highlighted AI’s capacity to outperform human managers by leveraging massive datasets and eliminating emotional biases, enabling portfolios to achieve asymmetric returns with minimized downside risk.
Portfolio Construction and Implementation
The panelists agreed on the transformative potential of AI but acknowledged challenges, including regulatory hurdles, biases in training data, and the need for human oversight. They emphasized that while AI has made significant strides, its most impactful applications lie ahead, particularly in democratizing access to sophisticated investment tools. The discussion underscored AI’s potential to reshape finance, from enhancing risk management to delivering tailored solutions for investors at all levels.
Deeper Dive: Insights from the Full Conversation
Beyond the headline strategy, the full conversation between Brad and Ai in Finance covered several additional themes worth highlighting for advisors and investors.
On Process and Philosophy
You have under one hand passive strategies, where essentially you mimic an index, usually a capitalization weighted index, and then you have the active strategies, which today are mostly human run active strategies. Meaning there's a portfolio manager making a decisions about when to come in and out of the market and how much risk exposure to take and what assets to invest in. Now, if you look statistically at the active strategies, you can see that they statistically underperformed the benchmark.
Next, we have an exciting panel on the future of smart investment strategies. And how AI is going to play a central role in this future. Let's invite our moderator, Brad Roth. Brad is a founding principal and chief investment officer at Thor Financial Technologies, which launched DHLV, a low-voltality ETF in September 2022. With over a decade of experience in creating operations and financial advisory, Brad has extensive expertise in investment strategies and fund management. Previously, he was a managing partner at Sardonex Capital managing a quantitative securities fund.
Market Context and Positioning
I was a quantitative researcher at a few different hedge funds that could have been sitting down. And I had my own startup. And then in 2018, was deciding what I want to do next. And realize it was a big opportunity with AI and finance, which was my, my love. So, decide to start AI funds. What the idea, the vision at least, is that AI really is destined to manage most of the assets that are investible. And the reason I believe that is because, and this is before tragic picking everything else, is because I saw what AI is able to do with narrow AI in many, many different domains.
Simply because AI for a bunch of reasons one it can process a lot more data than humans can it makes unemotional decisions and it's able to make predictions that are much more sophisticated using sophisticated machine learning models. They do a better job predicting both potential return and potential risk and as a result you're able to build smarter portfolios that will do better both in up markets and down markets. So that's a high level view of where things are going at least in my view and we can dive deep into how specifically we think we can help make that happen.
And that ends up hurting our performance as human managers. And this would be mentioned AI does not have emotions, so it's actually able to take advantage of those situations and actually generate alpha during those situations. So I think the biggest opportunity for AI today is really on the active side because there there's already underperformance and people are still there's more active investing than passive although passive has grown a lot over the past few years. But there's a huge opportunity there because AI can un-outperform, which potentially outperform human managers and I think that's really the direction the market is going to go first.
Notable Insights
"So, that's the reason we started AI funds with idea that this is really the biggest trend that's going to happen over the next few decades."
"The second part would be where I think we're making a bit of a mistake as an industry, and I think to tiles comments, what's the opportunity?"
Key Takeaways
- BAILA’s ability to identify market environments and adapt to changing conditions offers a smarter alternative to traditional active strategies.
- The conversation explores important themes in etf structure relevant to today's advisor landscape.
- The conversation explores important themes in market outlook relevant to today's advisor landscape.
What This Means for Advisors
For financial advisors evaluating options for client portfolios, this conversation with Ai in Finance highlights important considerations around quantitative investing. Understanding the strategy behind each fund—not just the ticker—helps advisors make more informed allocation decisions and better communicate the rationale to clients.
The themes of quantitative investing and etf structure discussed in this episode are particularly relevant in the current market environment, where advisors are increasingly looking for differentiated solutions that go beyond traditional benchmarks.
Listen to the Full Episode
This article is based on an episode of Behind the Ticker, hosted by Brad Roth, Founder and CIO of THOR Financial Technologies. For the full conversation with Ai in Finance, including additional nuances and details, listen on Spotify, Apple Podcasts, or watch on YouTube.