|Qraft Technologies CEO Kim Hyung-sik poses at the New York Stock Exchange during a ceremony to celebrate the listing of the company's artificial intelligence-powered exchange-traded funds in this July 2019 file photo. Courtesy of Qraft Technologies|
Qraft's robot-run ETFs hit jackpot with Tesla, DocuSign, Biogen
By Park Jae-hyuk
Tesla founder and CEO Elon Musk's bizarre tweets have long been regarded as major risk factors among the electric vehicle manufacturer's shareholders worldwide, prompting some investors to sue him and the U.S. Securities and Exchange Commission to issue warnings.
While most investors have felt it difficult to predict Tesla's stock price due to the weird behavior of its CEO, a Korean startup has drawn attention from Wall Street recently for its artificial intelligence (AI) powered exchange-traded fund (ETF), which sold all of its Tesla stock holdings at peak price and bought them again before the price bounced back.
The fund is the Qraft AI-Enhanced U.S. Large Cap Momentum ETF (AMOM), one of Qraft Technologies' four robot-run ETFs listed on the New York Stock Exchange (NYSE). The other three are Qraft AI-Enhanced U.S. Large Cap ETF (QRFT), Qraft AI-Enhanced U.S. Next Value ETF (NVQ) and Qraft AI-Enhanced U.S. High Dividend ETF (HDIV).
AMOM has especially gained popularity for its timely sales and purchases of Tesla shares over the past few months.
Amid growing attention on the secret behind its strategy, Qraft CEO Kim Hyung-sik clarified that Musk's tweets had limited impact on the AI program's stock-picking choices, although his messages on social media were parts of data used for analysis.
"His tweets were not helpful in predicting Tesla's stock price, so they can be seen as noise," Kim told The Korea Times in a recent interview at his office in Seoul. "They might have affected cryptocurrencies, but not Tesla shares. More important factors were the patterns of the stock price movements, financial data and the news."
After the latest monthly rebalancing in June, AMOM sold its entire Tesla stock holdings, just a month after including them in its portfolio. Qraft's robot-run ETFs have also caught the attention of Reddit users this month for buying DocuSign and Biogen stocks, a few days before their prices soared.
Kim, who earned a bachelor's degree in electrical and computer engineering and a master's degree in economics from Seoul National University, said it is difficult to explain the reasons behind AI's decisions, because what robots emphasize keeps changing and humans do not meddle with the decision-making once the robots finish their analysis, based on deep learning technologies.
He emphasized that the robots were able to adapt quickly to the market changes caused by the COVID-19 pandemic last year, in contrast to human-reliant asset management firms that failed to start buying stocks before the bullish run.
According to the CEO, both AMOM and QRFT, which marked the second anniversary of their listings in May, have outperformed their benchmark indices, helping the company win greater trust from investors. The other two ETFs have also shown double-digit return rates over the past three months.
"The outcomes are satisfactory," he said. "World-class asset management firms, such as BlackRock, Goldman Sachs and Vanguard, came up with similar products, but ours have shown better performance."
|A banner celebrating the listing of Qraft Technologies' artificial intelligence-powered exchange-traded funds on the New York Stock Exchange is seen in this July 2019 file photo. Courtesy of Qraft Technologies|
The Qraft CEO said such performances have led more retail investors in other countries, including the U.S., Canada and Europe, to make investments in the company's AI-powered ETFs.
However, he admitted that the company's ETFs need to increase their assets under management (AUM) to attract larger institutional investors, whose internal regulations bar them from investing in ETFs without a certain level of AUM.
"Smaller institutions and family-run offices began to buy into our ETFs," he said. "The increase in assets has accelerated lately. We expect they will go up further if our AI wins the trust of investors."
As part of efforts to promote the company, Qraft has established an office in Hong Kong.
Kim said Qraft is considering listing its ETFs in Korea, Hong Kong and Europe. He added that the company finished developing two additional ETFs to be listed on the NYSE in the near future.
But he remained cautious about the company's plan for an initial public offering (IPO), although it selected Hana Financial Investment as an underwriter last year and has attracted a combined 30 billion won ($27 million) in investments from the Korea Development Bank, Smilegate, Dunamu & Partners and several other institutions. Qraft will also seek to attract additional investments from foreign investors sometime next year.
"We will go public when we make sizable earnings," Kim said. "We can consider an overseas listing, because we have many foreign customers. However, it is too early to talk about this."