In another article we spoke about the rise of Artificial Intelligence in our society and how this is projected for massive growth in the future.
Like all thematic investments, finding the right instrument is not easy. Although companies involved in the sector are growing, as things stands there are various firms which even though are involved in A.I., such technology is not a core part of their revenue. This therefore means that while you might think to be invested in an A.I. stock, really and truly you will not be gaining as much from the advancement in the AI spectrum.
Furthermore as A.I. is an emerging technology, there is a risk that the stock you have identified will face various headwinds going forward either from regulatory pressures or failure in technology.
Based on the above, when it comes to thematic investing I prefer using an ETF where I will be confident that there are professionals involved in tracking the right stocks thereby I am certain that I will be gaining from the growth in this ascending market. Additionally I will be protecting my portfolio even more through the mix of different stocks in different geographical regions.
Today we will be looking at the WisdomTree Artificial Intelligence UCITS ETF which was just recently launched.
Overview of this ETF
The WisdomTree Artificial Intelligence UCITS ETF seeks to track the Nasdaq CTA Artificial Intelligence index thereby provides investors with exposure to companies that will benefit from the growth in AI adoption.
Comprising 52 securities, the index identifies companies that are enhancers, enablers or engagers in the area of artificial intelligence.
Engagers make up 50% of the index exposure and are defined as companies that focus on providing AI-powered products and services.
Enablers total 40% of the index and are companies whose core products and services enable AI, including component manufacturers and platform provider that power the running of AI processes.
Enhancers make up the final 10% of the index and are businesses who are involved in AI, but the product is not a core part of the firm's revenue.
Only companies with the top 15 scores in each of the three categories are selected for inclusion and are weighted evenly (see graphic below to understand how the ETF is constructed).
Commenting during launch, Christopher Gannatti, head of research in Europe at WisdomTree, "When investors think of what this can bring to a portfolio, they should be thinking over a long time horizon and about how advances like autonomously driven cars, a digital workforce, mass facial recognition and other applications of intelligent machines could change the world."
This ETF is available in EUR (on the Borsa Italiana IE00BDVPNG13) and in USD and GBP on the London Stock Exchange (IE00BDVPNG13). The annual management fee of this ETF is just 0.40% per annum. The fund contains 50 different companies with more than half of them being Large Cap companies.
Would you like to know more about our strategies in thematic investing? In our research report we discuss several other key thematic investment approaches to consider for the new year!
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