Artificial Intelligence Investment And Productivity

Active investment in AI is essential for capitalizing on opportunities and boosting productivity, as passive strategies struggle in this dynamic field.

The complexity of artificial intelligence demands an active investment approach to effectively identify opportunities and offer genuine market exposure to investors.

How does Artificial Intelligence affect investment strategies? What are the investment trends within the AI field? How does Artificial Intelligence influence business productivity and economic growth? Is passive investment profitable when it comes to the AI sector?

Matthew Bullock and Jeremiah Buckley, specialists at Janus Henderson, discuss how Artificial Intelligence is affecting investment strategies and how it is impacting business productivity.

Investing in AI? It’s no place for passive

By Matthew Bullock

The complexity of artificial intelligence demands an active investment approach to effectively identify opportunities and offer genuine market exposure to investors.

Index providers have begun offering up passive products at super low cost on the premise that investors can get exposure to all the upside potential of AI, but without the costs of active management.

This is very much “theme washing” and we remain concerned that investors are being sold a marketing story rather than the exposure to AI they expect due to primitive methodologies being applied to a highly complex market.

How passive strategies work

Before I explain why passive isn’t the place for AI, it’s important to take a step back and look at how an index exposure works.

An index is created by using a mathematical formula to allocate between securities in a particular market segment. These market segments can cover a broad range of areas including country, region, sector, theme, style.

There are two points to note here:

The rules/formula around the index are determined before the index launches and do not change
The criteria for determining the market segment (i.e. what’s in / out of scope) is also set prior to launch and does not change[…]