Today, First Trust bolstered its expansive ETF library with the release of the First Trust Bloomberg Artificial Intelligence ETF.
FAI has a net expense ratio of 65 basis points. The fund seeks to provide results that match the price and yield of the Bloomberg Artificial Intelligence Index.
Bloomberg’s Artificial Intelligence Index is built to track the performance of companies deeply involved with artificial intelligence. The index’s purview extends to companies that develop and facilitate artificial intelligence solutions. These solutions include machine learning, deep learning, natural language processing, and speech recognition, among others.
Once a selection of eligible companies has been identified, the index then picks the top 50 companies based on both market cap and revenue from artificial intelligence. The index is then weighed based on the same criteria.
Capitalizing on AI
“While AI is still in its early innings, its potential to dramatically boost productivity and efficiency across numerous applications is undeniable. While it’s challenging to pinpoint the exact winners and losers at this early juncture, FAI aims to strike a balance between focused selectivity and diversification by investing in 50 stocks within the burgeoning AI ecosystem,” noted Ryan Issakainen, CFA, senior vice president and ETF Strategist at First Trust.
Within the index’s portfolio, the top five companies each could have a maximum weight of 8%. Inversely, all the other securities inside the portfolio can weigh up to 4%. As a side note, no company within the index should have a weight below 0.25%.
Generally speaking, this Bloomberg index will hold 50 securities. The index itself also gets rebalanced and reconstituted on a quarterly basis.
FAI uses a full replication strategy to best track the index. As such, the fund will usually invest in every asset within the Bloomberg index.
As an ETF that uses a full replication strategy, FAI expects to hold similar sector concentrations to that of its index. Due to its focus on artificial intelligence, the Bloomberg index currently holds strong exposure to companies in the information technology sector.
First Trust currently has more than 160 ETFs listed in the United States. As a whole, these funds represent well over $150 billion in assets under management.
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