Reality Shares unveils AI-driven multi-factor ETF

Nov 5th, 2018 | By | Category: Equities

Reality Shares has launched the Reality Shares Fundstrat DQM Long ETF (DQML US) on NYSE Arca.

Reality Shares multi-factor ai etf

The fund uses machine learning to improve upon its factor analysis over time.

The fund has been brought to market in partnership with Fundstrat Global Advisors, an independent research boutique providing fundamental market strategy and sector research.

The fund provides exposure to US-listed stocks that have been selected using a multi-factor process driven by artificial intelligence (AI).

The fund tracks the Fundstrat Doctor Quant Model US Large Cap Equal Weighted Long Index which screens the largest 500 companies in the US by market capitalization as its starting universe.

The methodology uses extensive bottom-up research to score each stock on more than 40 individual metrics which collectively fall into eight factor groups: cash flow, credit metrics, balance sheet, income statement, valuation, sentiment, momentum and laggards.

A composite multi-factor score is then calculated for each firm; however, the weight of a factor in calculating the composite score will vary depending on the sector the company is operating in. Reality Shares provides the example that value may have a higher weight within a utility stock, while momentum would likely carry a higher weight within information technology stocks.

These relative factor weightings may even change over time as the index utilizes artificial intelligence through machine learning to improve upon its investment approach over time.

The index selects the 100 stocks with the largest composite scores and equally weights them, rebalancing on a quarterly basis.

“As a firm, we are committed to providing the best-in-class fundamental, technical and quantitative research to our clients,” said Thomas Lee, Managing Partner and Head of Research at Fundstrat.

“We’re excited to be working with Fundstrat on their inaugural ETF,” added Eric Ervin, CEO of Blockforce Capital, the parent firm of Reality Shares. “Tom Lee and his team are luminaries in the investment space and there is an incredible synergy between our firms – from our data-intensive investment approach to our shared views on digital assets. We look forward to an innovative, and long-term partnership.”

The ETF is offered with an expense ratio of 0.69%. Distributions are made to investors on a quarterly basis.

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