Would You Let a Robot Make Your Investment Decisions?

Robot, take the wheel. 

Ai Funds launched an ETF last month that uses a proprietary artificial intelligence model to select and manage a high-conviction portfolio of 40 to 60 US stocks. The Ai Funds High Conviction US Equity AI-Managed ETF (HIAI) aims to beat the S&P 500 over a full market cycle and adjusts risk depending on market signals, according to the prospectus. While many funds use AI-assisted strategies, having AI run the show (with human oversight) is fairly unique. Tal Schwartz, founder of Ai Funds, believes that AI-managed funds could become the third option in the current active versus passive binary. 

“It will still be years and possibly decades for that to happen because the industry is conservative and they will want to see the proof in the pudding,” Schwartz said. “I’m very optimistic, but I also realize it’s a long journey to prove this.”

Always Gonna Be Another Mountain

Beating the S&P 500 is notoriously difficult. But for Ai Funds, that’s the point. “We chose that as our benchmark for HIAI because it is so difficult,” Schwartz said. “We think that HIAI is good enough at this point to be able to exceed the benchmark.”

Still, the road to success is steep, especially with HIAI’s 0.87% expense ratio, which four analysts told ETF Upside is unusually high. In 2025, active ETFs had an average expense ratio of 0.74%, according to Fidelity. “Ultimately, to really succeed, you need to put together a three-year track record that big broker dealers look at faithfully,” said Loren Fox, research director at FUSE. “If this can survive for three years and outperform the S&P 500, then that’s a different story. But I think that they’re going to face an uphill battle.” 

AI-managed funds haven’t had an easy time so far, per Morningstar:

• Five of the seven currently trading ETFs have outperformed the S&P 500 over the past year, but only two of them have outperformed over the past three years. All seven have outflows over the year-to-date, one-year and three-year time frames. 
• Of the 21 funds launched in this category, eight have since folded. 

Alpha, Final Boss: Schwartz argued that Ai Funds’ model sees patterns that humans miss and is not swayed by biases and emotions. But with the vast amount of information available to investors these days, is that enough to give the fund an edge? “I just don’t know how this is going to find something that the overall market won’t,” said Athanasios Psarofagis, an ETF analyst at Bloomberg Intelligence. Maybe “eventually they get so smart and it just says, ‘Hey, you know what? I can’t beat the market. I can’t overtrade it. I’m recommending you just buy the S&P 500.’ I feel like that’s like the final boss.”