LG, the renowned South Korean conglomerate known for its household appliances and electric vehicle battery components, is making its foray into the world of finance with the launch of an AI-powered exchange-traded fund (ETF). The company’s AI research division has […]
LG, the renowned South Korean conglomerate known for its household appliances and electric vehicle battery components, is making its foray into the world of finance with the launch of an AI-powered exchange-traded fund (ETF).
The company’s AI research division has joined forces with Qraft Technologies, a manager of AI-focused investment funds backed by Japan’s SoftBank, to launch the LG Qraft AI-Powered US Large-Cap Core ETF (LQAI) on the New York Stock Exchange on Tuesday. This ETF, similar to mutual funds but with the ability to trade like stocks and enjoying favorable tax treatment in the US, utilizes LG’s proprietary forecasting tool. It focuses on 100 large American companies and rebalances its portfolio every four weeks in an effort to outperform the S&P 500 index.
This venture into asset management marks LG’s first foray into the financial sector. In addition to serving as an investment vehicle, their ETF serves as a test that could influence the group’s decision to further explore the financial applications of their AI technology. “We don’t have a financial business in our portfolio, so we needed a partner to enter the market,” said Young Choi, Director of Business Development and Strategic Partnerships at LG AI Research, in an interview with Financial Times. “We utilized Qraft for that, and together with our globally recognized brand, we expect this to provide us with significant synergistic potential. The story is quite unique.”
LG and Qraft initiated discussions in March and announced their research partnership agreement in August. The two companies’ ETF relies on the analysis of a large volume of financial and textual data, first excluding hundreds of potential investments with low growth prospects, and then reallocating the approved stocks based on their perceived growth potential. This launch represents a significant milestone for Qraft, which currently manages around $26 million in assets through four existing ETFs that leverage their own AI capabilities. LQAI will use LG’s stock selection tool while also relying on Qraft for portfolio optimization, risk management, and initial capital, according to Francis Geeseok Oh, Head of AI ETFs and Executive Director for the Asia-Pacific region at Qraft. “There are many active investors in the market, many big names, but some of them manage to achieve good results while others do not,” Oh remarked in his interview with FT. “When we consider the reasons for that, it could be either excessive reliance on key individuals or human emotions.”
LG’s AI Research Center has been exploring the applications of AI technology in predicting supply and demand, procurement of raw materials, consumer trend forecasting, and other non-financial areas for several years. Positive reception of this ETF could open doors to new opportunities, Choi noted. “It’s about dipping our toes in the water. We’re doing everything possible, but we don’t have a financial business. Now, we’re testing the market.”
Frequently Asked Questions (FAQ)
What is LG’s new venture in the finance sector?
LG has introduced an AI-powered exchange-traded fund (ETF) called LG Qraft AI-Powered US Large-Cap Core ETF (LQAI) in collaboration with Qraft Technologies. This ETF leverages LG’s proprietary forecasting tool to focus on 100 large American companies and outperform the S&P 500 index.
How does LG’s AI-powered ETF work?
LG’s ETF analyzes a vast amount of financial and textual data to exclude low-growth potential investments. The portfolio is then rebalanced every four weeks based on the perceived growth potential of the approved stocks.
What role does Qraft Technologies play in this partnership?
Qraft Technologies, supported by SoftBank, collaborates with LG to manage the AI-powered ETF. They handle portfolio optimization, risk management, and initial capital in addition to utilizing LG’s stock selection tool.
Is this LG’s first venture into the financial sector?
Yes, this marks LG’s first entry into the finance industry. The success of this ETF could pave the way for further exploration of financial applications for their AI technology.
What other areas has LG’s AI Research Center been exploring?
LG’s AI Research Center has been focusing on various non-financial areas such as predicting supply and demand, procuring raw materials, and forecasting consumer trends using AI technology.