A Newly Issued ETF, the AI Smart ETF

Why is AI so hot?

It is widely believed in the market that after the age of steam, electricity and information, the fourth industrial revolution has crept in, and that artificial intelligence Gradually step into reality. Let the development of artificial intelligence has three main stages: basic technical support, artificial intelligence technology and artificial intelligence applications. The current stage is in the transition from AI technology to applications, which will gradually expand to unmanned driving, security, urban management, financial and medical care, etc.

Policy support, huge potential: the world has made the AI field a strategic national level development, with the US, Europe, Japan, etc. A number of related policies have been introduced to support this, and in China there is the Development Plan for a New Generation of Artificial Intelligence. The World Artificial Intelligence Conference WAIC is held in August each year, and AI is gradually converting from technology development to products, and will gradually move towards the future of the Industrialization and marketization, its practical application potential should not be underestimated.

Considerable growth rate, strong growth: according to statistics, artificial intelligence theme components and other traditional industries compared to the past 10 years, revenue compound growth rate, net profit compound growth rate are higher than the traditional industry.

How to Use ETFs for Alternative Investments

First of all, let me introduce you to the concept of "Alternative Investing". . Within the traditional asset allocation framework, the more dominant asset classes include: stocks (primarily secondary markets), bonds and real estate.

These three asset classes are more familiar to most investors. Everyone understands, for example, that company stock, represents ownership (shares) of a company listed and circulating on a stock exchange. The price of the stock can go up or down based on a variety of factors. If the economic fundamentals are better, the public is more enthusiastic about investing, people are more confident about the future, and the company's earnings exceed expectations, then The company's stock price is likely to rise, and vice versa. Most investors, too, have some level of understanding of the risks associated with investing in stocks, bonds and real estate.

Outside of these three traditional asset classes, there are a number of other asset classes. They are collectively referred to as "alternative assets," or "other classes" of assets that are different from traditional assets. These alternative assets include.

1) Hedge funds.

Strictly speaking, hedge funds themselves cannot be categorized as a particular asset class. This is mainly because hedge funds have a wide variety of investment strategies, including Market Neutral, CTA, Distressed Debt, Trend Following, FX, Arbitrage, Global Macro, etc. There is almost no correlation at all between the different investment strategies. Therefore, there are actually many different "asset classes" under the broad category of hedge funds.

2) Private Equity.

Private equity, including Leveraged Buy Out (LBO), Venture Capital, and Private Equity. Capital, Angel Investing, Growth Capital, etc. stage of the investment strategy. The common feature of these strategies is to invest in the equity of the company circulating in the primary market prior to the company's IPO.

3) Natural Resources and Commodities.

This asset class consists of natural resource commodities such as oil, forests, gold, silver, copper and iron.

Why invest in "alternative assets" in addition to traditional asset classes?

In general, there are several reasons for this.

1) Reduce the beta of your portfolio.

Stocks are one of the most important asset classes in most individual and institutional portfolios. Stocks are characterized by volatile prices. The frequency and magnitude of the price fluctuations depend on the beta of that portfolio. Adding some alternative assets to the portfolio (provided that the alternative asset can provide a positive return with low beta) can reduce the overall The beta value of the portfolio reduces the risk of the entire portfolio.

2) Get Alpha.

In "How can I learn from the Government of Singapore Investment Corporation (GIC) to design an asset allocation strategy for myself? In an article, I have detailed how GICs can combine traditional and alternative assets for higher risk The Adjusted Income Approach.One of the main reasons GICs spend a lot of effort on alternative assets is to get over-investment Returns (Alpha).

Prior to the invention of new financial instruments such as ETFs, the average retail investor's investment universe was largely limited to traditional assets type. If they want to invest in "alternative assets", they need to have a relatively large amount of capital and can only buy private placements that are very expensive. funds or master funds (FOFs). However, in the last few years, some relatively new ETFs have emerged to fill the gap in this area.

To summarize

Alternative investing is an investment strategy that invests in more specific asset classes in addition to the purchase of traditional broad asset classes. The main purpose of investing in alternative investments is to reduce the overall investment risk of the portfolio and to gain alpha (excess return).

Compared to traditional classes of investments, alternative investment strategies are more complex and expensive, so they are more suitable for those with some investment knowledge We need to understand that not every investor needs an alternative asset class and experience, but also a large amount of capital. What we need to understand is that not every investor needs alternative assets. The average retail investor can live his or her life without buying any alternative assets. Before considering buying any alternative asset ETF, an investor should do their homework and figure out the boundaries of their knowledge before confirming the Make prudent investment decisions after you understand their investment risks yourself.

I hope this helps.