On Wednesday, the Draco Evolution AI ETF (DRAI ) began trading on the NYSE Arca.
The actively managed DRAI has a net expense ratio of 1.50%. It aims to generate long-term capital appreciation for investors.
Draco Evolution serves as the fund’s subadvisor. The subadvisor is an offshoot of Draco Capital Partners, which is led by Jack Fu and YouTube co-founder Steve Chen.
The fund can invest in a wide variety of asset classes, including commodities, and bonds, and equities of any size, among others. Typically, asset exposure for DRAI will be done by investing in a variety of ETFs. Per the fund prospectus, Draco Evolution aims to hold about 10-20 different ETF positions in asset classes.
In choosing ETFs to invest in, DRAI evaluates each fund based on structure and performance records compared to its peers. The prospectus adds that Draco typically focuses on ETFs that also have lower operating costs and establishes expertise in executing their respective strategies. Due to the fund’s unique investment model, DRAI may hold larger positions in some asset classes or industry sectors.
AI and Quantitative Strategy
Draco’s proprietary AI-driven model serves as the crux for the fund’s investment strategy. The Draco Model mixes a combination of artificial intelligence and macroeconomic quantitative models.
The AI model uses pricing data and a variety of indicators to predict the performance of market securities. Training for the model was done in part by using data on moving averages and average true ranges.
A macroeconomic data-focused quantitative model buoys this AI strategy. This includes a wide number of factors, including consumer goods and materials orders, building permits, money supply, consumer expectations, and average weekly hours worked.
As an actively traded fund, DRAI will use its AI model to assess market conditions frequently. The intent is to both rebalance and pivot for risk management. Due to this, the fund may engage in frequent trading.
Additionally, the fund may invest in futures contracts. Allocations to futures contracts are used for both downside protection and potential asset class exposure.
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