Pictet AM launches an investment fund that applies AI to stock selection

Pictet Asset Management has introduced the Pictet-Quest AI Driven Global Equities, an enhanced indexed investment strategy that leverages the scale and efficiency of artificial intelligence in stock selection. With an aim to outperform the global MSCI World index by up to 1.5% annually, the fund boasts low tracking error and a management fee of 0.2%, lower than traditional active management.

Innovative Approach to Stock Selection

The investment team at Pictet AM's Quest quantitative equity strategies has developed a proprietary return prediction model for stock selection. Rather than relying on market variations through smart or exotic betas to enhance the risk-return profile against indices, the team utilizes well-established datasets to analyze equity markets. This transparent instrument predicts a stock's idiosyncratic component with exceptionally high confidence and precision, optimizing it within the portfolio.

Significance of Additional Returns

Pictet emphasizes that during the recent unprecedented bull market in equities, investors and asset managers were able to profitably build significant portions of their portfolios simply by replicating the index. However, with the expectation of global equities providing only 6% annually over the next five years in a low-growth environment, the potential for an additional 1% return in equities is deemed significant. Pictet suggests considering an enhanced indexing approach as a substitute for core portfolio positions.

Long-Term Impact of Excess Returns

David Wright, Co-Head of Quest Quantitative Strategies at Pictet AM, highlights the transformative potential of rapidly expanding machine learning and AI technologies combined with improved market data quality. He underscores that generating systematic excess returns can have a profound long-term effect. Over a decade, a 1% annual return difference after fees compared to a global equity index could translate to approximately 11% extra returns.

With its innovative AI-driven approach and focus on delivering superior returns, the Pictet-Quest AI Driven Global Equities strategy presents investors with an enticing opportunity to capitalize on the evolving landscape of quantitative investing