Pictet’s Wright on “Investing With Rather Than In AI"

Why It Matters

PQUS provides a scalable way for passive‑oriented investors to capture AI‑generated alpha without exposing portfolios to volatile AI‑stock bubbles, potentially enhancing long‑term returns as market dynamics evolve.

Key Takeaways

• Pictet’s AI‑enhanced US equity ETF uses AI to select stocks.
• Model forecasts residual 20‑day returns, avoiding traditional factor exposures.
• Tree‑based decision‑forest algorithm, not large language model, powers predictions.
• Model retrained quarterly on 15‑year window, expanding features from 200 to 400.
• Fund aims for beta‑1 with 2‑2.5% annual outperformance versus benchmark.

Summary

The video introduces Pictet’s AI‑enhanced US equity fund (PQUS), a product that invests with artificial intelligence rather than simply buying AI‑related stocks. The strategy blends passive‑style risk with active, AI‑driven stock selection, aiming to deliver market‑like exposure while adding consistent alpha.

PQUS relies on a tree‑based decision‑forest model trained on hundreds of thousands of data points spanning fifteen years. The model forecasts the next 20‑day residual return— the portion of performance not explained by traditional factors such as momentum, value, or sector exposure. By constraining the portfolio against benchmark factor bets, the fund seeks returns that are uncorrelated with standard factor‑driven strategies.

Key details include quarterly model retraining, a rolling 15‑year data window, and an expanding feature set that has grown from roughly 200 to 400 company characteristics. The manager emphasizes that the approach is computationally efficient, interpretable, and deliberately avoids large language models, which are less specialized for pure return forecasting.

The fund targets a beta of one with the U.S. equity market while aiming to generate 2‑2.5% annual outperformance. It is positioned for advisors and investors who rely on core passive allocations but seek incremental alpha as equity returns are expected to moderate, offering a hybrid solution that marries index‑like stability with active AI‑driven excess returns.

Original Description

Pictet's Head of Quantitative Investments, David Wright, grabbed time with Sumit Roy, Senior ETF Analyst at ETF.com, while at Future Proof Citywide. The two discussed the Pictet AI Enhanced Equity ETF (PQUS), including how the firm uses artificial intelligence in its strategy.

For a full transcript of this conversation, go to: https://www.etf.com/sections/conferences/pictets-wright-investing-rather-ai

For more information about Pictet AI Enhanced US Equity (PQUS) ETF, visit https://etf.am.pictet.com/pqus/?utm_campaign=usetf&cid=2803228892&utm_source=etf_com&utm_content=sumititwcta&utm_medium=social_02&utm_term=youtube

Important information

Investors should consider the investment objectives, risks, charges, and expenses carefully before investing. For a prospectus with this and other information about the fund, please visit www.pictet.com/etf or call [phone]. Please read the prospectus carefully before investing. Investing involves risk and principal loss is possible. Equity securities are subject to changes in value, and their values may be more volatile than those of other asset classes.

The Fund invests in foreign securities, which are generally riskier than U.S. securities. Securities of foreign issuers may be less liquid, more volatile and harder to value than U.S. securities. If the Fund buys securities denominated in a foreign currency, receives income in foreign currency, or holds foreign currencies from time to time, the value of the Fund’s assets, as measured in U.S. dollars, can be affected unfavorably by changes in exchange rates relative to the U.S. dollar or other foreign currencies. Foreign markets are also subject to the risk that a foreign government could restrict foreign exchange transactions or otherwise implement unfavorable regulatory, taxation, securities markets or other currency exchange rates or regulations, or imposition of economic sanctions, tariffs or other government restrictions, higher transaction and other costs, reduced liquidity, and delays in settlement.

The Fund relies heavily on a proprietary artificial intelligence selection model as well as data and information supplied by third parties that are utilized by the model. To the extent the model does not perform as designed or as intended, the Fund’s strategy may not be successfully implemented and the Fund may lose value. If the model or data are incorrect or incomplete, decisions made in reliance thereon may lead to the inclusion or exclusion of securities that would have been excluded or included had the model or data been correct and complete. The use of predictive models has inherent risks. For example, such models may incorrectly forecast future behavior, leading to potential losses. In addition, in unforeseen or certain low-probability scenarios (often involving a market disruption of some kind), such models may produce unexpected results, which can result in losses for the Fund. Furthermore, because predictive models are usually constructed based on historical data supplied by third parties, the success of relying on such models may be hindered heavily on the accuracy and reliability of the supplied historical data.

The Fund is an ETF and, as a result of this structure, is exposed to additional risks that do not apply to conventional mutual funds, including the risk that market price of an ETF’s shares may trade at a premium or discount to its net asset value, an active secondary trading market may not develop or be maintained, or trading may be halted by the exchange in which the ETF is listed. Shares of any ETF are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. The Fund has a limited operating history for investors to evaluate, and a new or smaller fund is subject to the risk that its performance may not represent efficiency. There can be no assurance that the Fund will achieve an economically viable size, in which case it could ultimately liquidate.

Distributed by Foreside Fund Services, LLC.