LG branches out from TVs and dishwashers to launch AI-run ETF

LG, the South Korean conglomerate known for home appliances and electric vehicle battery components, is wading into finance with the launch of an exchange traded fund powered by predictive artificial intelligence

LG’s AI research division partnered with Qraft Technologies, an AI-focused ETF manager backed by Japan’s SoftBank, to launch the LG Qraft AI-Powered US Large-Cap Core ETF, or LQAI, on the New York Stock Exchange on Tuesday.

The ETF — similar to a mutual fund but trading like a stock and enjoying preferential tax treatment in the US — will use a proprietary LG forecasting tool to focus on 100 large US companies, rebalancing every four weeks while seeking to outperform the S&P 500.

The foray into asset management is a first for Seoul-based LG. Its ETF, besides its capabilities as an investment vehicle, will act as a test that could inform the group’s decision on whether to further explore financial applications of its AI technology.

“We don’t have a financial business in our portfolio, so we needed a go-to-market partner,” Young Choi, director of business development and strategic partnerships with LG AI Research, told the Financial Times. “We’re leveraging Qraft for that, and mixed with our brand, which is quite big globally, we’re expecting that will provide a lot of synergy potential. The storyline is quite unique.”

LG and Qraft began talks in March and announced a research partnership agreement in August. The two companies’ ETF rests on the analysis of a trove of financial and textual data to first exclude hundreds of would-be holdings based on downside risk and then reweight the portfolio of approved stocks based on their perceived upside potential.

The launch represents a leap in prominence for Qraft, which has about $26mn in assets under management across four existing ETFs using its own AI capabilities. LQAI will use LG’s own AI tool for stockpicking, but it also will lean on Qraft for portfolio optimisation, risk management and seed capital, said Francis Geeseok Oh, head of AI ETFs and Asia-Pacific chief executive for Qraft.

“There are many active investors, a lot of big names in the market, but some of them have been able to continue delivering performance and many of them haven’t,” Oh told the FT. “And if you think about the reason why, it could be either just too much of the key man dependence or human emotion dependence.”

LG’s AI research hub has for the past few years been exploring the use of AI in forecasting supply and demand, purchasing raw materials, predicting consumer trends and other non-financial applications. A positive reception to this ETF could lead to more to come, Choi said.

“We do all sorts of things, but we don’t have a finance business. We are trying to test the waters now.”