In the episode of "Behind the Ticker," Brad Roth and Weldon Rice from Qraft Technologies discuss the integration of artificial intelligence within the investment landscape, particularly through Exchange-Traded Funds (ETFs). This conversation provides a detailed look at how Qraft applies AI to develop and manage ETFs, offering insights into the practical implications and methodologies behind AI-driven investment strategies.Weldon Rice introduces two specific ETFs during the discussion: the QRFT and the AMOM. The QRFT ETF is designed to leverage AI in managing a portfolio of U.S. large-cap stocks, aiming for a balance between diversification and performance by analyzing large datasets to identify market trends and inefficiencies. The ETF maintains a portfolio of roughly 300 to 320 stocks and is adjusted monthly based on AI's analysis.The AMOM ETF, in contrast, focuses on capturing momentum within the U.S. large-cap space, holding a more concentrated portfolio of around 50 stocks. This ETF seeks to dynamically adjust to market conditions, emphasizing stocks or sectors displaying strong momentum. It's described as having a more focused investment strategy, with potential for higher volatility given its concentration and rebalancing approach.Rice emphasizes the role of AI as a tool to complement, rather than replace, human decision-making in the investment process. The discussion highlights how AI can enhance traditional investment strategies by providing deeper insights into market data and trends, thus aiding in portfolio construction and risk management.By examining QRFT and AMOM, the episode explains how AI technologies are applied in the creation and management of ETFs. These examples illustrate Qraft's approach to integrating AI into finance, aiming to offer innovative solutions for investors looking to benefit from the advancements in AI for portfolio management and investment decision-making.
Deeper Dive: Insights from the Full Conversation
Beyond the headline strategy, the full conversation between Brad and Weldon Rice covered several additional themes worth highlighting for advisors and investors.
On Process and Philosophy
I'm Brad Roth, Chief Investment Officer of Thor Financial Technologies, and portfolio manager of THLV, the Thor Low Volatility ETF. Behind the ticker uncovers the inner workings of the ETF industry. We will interview portfolio managers and ETF service providers to dive deep into their work lives and their businesses. We will learn the inner workings of their strategies and what drives them as they continue to grow their company. Many of these individuals are entrepreneurs, and will have unique and compelling insights to share as much goes on behind the ticker.
So, I know you guys have a lot of other products and I'm going to have you or somebody else from your team back on, because I know you're going to keep launching ETFs, but let's talk broadly as we kind of close out. How should advisors, if you're a registered investment advisor, how should they be thinking about implementing AI driven strategies inside their portfolio? Like, do you see them as a holistic solution or more of like a satellite exposure?
Market Context and Positioning
And what we're trying to do is use AI to bring a more robust exposure to those factors. We're trying to look at more like risk adjusted returns, especially when we're looking at security selection in that space. In terms of what we do with the large language models, we don't employ as much on the on sort of textual and sentiment data. But we do have some capabilities there, and especially, you know, recently we just launched a new ETF with LGI research.
There's an ETF market in Asia. There are many ETFs in Korea. In fact, Mere Asset, one of the largest SM managers in Korea, actually owns Skullblex ETFs. Several other ETFs around the globe. So they have their own locally ETFs that they have. So Asia has a pretty decent ETF market.
I worked a little bit in higher education and I moved the broad whenever I write out a college. So I've been in Asia, living in Asia for a bit over 12 years. And then I ended up studying in finance while I was there in Korea. I studied under some quant hedge fund managers and some really big players in Korea, like Goldman Sachs had there and really really fell in love with finance, especially quantitative approaches to finance. So yeah, I got an opportunity to come on board with craft technologies.
So as you mentioned, ETFs is just one part of what we do. And we were actually founded in 2016. And we're founded as an investment technology company. So outside of just the ETFs, we also do model portfolios. We've run different sort of vehicles. So we're really a B2B solution providers. We work with, we're based out of Seoul, Korea. And we work with a lot of largest financial institutions in Korea starting out. A lot of that was model portfolios or portfolio construction helping them to launch AI power products their own products.
Notable Insights
"And I think for most people, you might get confused on what the difference are between those."
Key Takeaways
- The QRFT ETF is designed to leverage AI in managing a portfolio of U.S.
- The ETF maintains a portfolio of roughly 300 to 320 stocks and is adjusted monthly based on AI's analysis.The AMOM ETF, in contrast, focuses on capturing momentum within the U.S.
- This ETF seeks to dynamically adjust to market conditions, emphasizing stocks or sectors displaying strong momentum.
What This Means for Advisors
For financial advisors evaluating options for client portfolios, this conversation with Weldon Rice 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 portfolio construction 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 Weldon Rice, including additional nuances and details, listen on Spotify, Apple Podcasts, or watch on YouTube.