Merlyn.AI Corporation (MAI), a Palo Alto-based provider of exchange traded funds, has launched WIZ – an ETF that tracks the Bull-Rider Bear-Fighter index – on the New York Stock Exchange (NYSE).This index employs AI genetic algorithms, which enable it to adapt to changing markets.
“Most investors want an ETF that improves returns in both bull and bear markets,” says David Epstein, MAI CEO and Co-founder. “WIZ seeks to do just that.”
The Bull-Rider Bear-Fighter index strives to select the top momentum leaders during bull markets and opportunely shift to the Bear Market Strategy (bonds, treasuries, gold ETFs) when markets appear to have an elevated risk of decline. It does this with the ground-breaking application of three forms of AI:
1 Genetic Algorithms evaluate more than 750 ETFs to select sets of candidate funds for an ever-evolving population of competing momentum strategies. They then choose only the top momentum performers for the portfolio. This helps mitigate the risk of human-based hindsight selection bias in the ETF selection process and enables the index to adapt to changing market conditions.
2 Fuzzy Logic is used to evaluate 14 characteristics of the market to assess when it appears to have an elevated risk of decline. If the result exceeds a fixed threshold, the index will switch to a Bear Market Strategy automatically, seeking to maximize profits even during downturns.
3 Adaptive Tuning assess past market data and tunes the algorithms’ momentum filters using differential signal processing and match filter theory – both of which may improve the probability of making better investment selections.
The Bull-Rider Bear-Fighter index is the result of more than three decades of research and development by MAI Co-founder and Chief Science Officer Scott Juds, who discovered trends in market data using advanced signal processing in early 1992. Juds has been refining his system through many bull and bear markets ever since. The benefits of assessing an elevated risk of market decline and utilising adaptive momentum filters have been fuelling the success of Juds’ 10-year-old SumGrowth Strategies LLC in Seattle, WA. This new AI approach already has the support of SumGrowth’s subscribers, both individual investors and financial professionals around the country. To further improve investing simplicity as well as tax efficiency, Merlyn.AI Corporation was formed to deliver this index as an ETF.
“Better performance requires the resolution of multiple problems. While the industry is currently focused on neural networks and the belief that one tool can solve everything, WIZ takes a divide-and-conquer approach by using the best AI tool for each problem,” says MAI COO Sue Guzman. “As a result, this Merlyn.AI ETF seeks to avoid market risk instead of merely diluting it through diversification, a process that typically draws down overall portfolio performance by including laggards.”
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