Artificial Intelligence in the Investment Process
While humans lead the product design and oversight of QRAFT AI-Enhanced ETFs, the AI processes play a major role in our recommendations.
Data is the lifeblood of an AI model, which is why Qraft built the Kirin API (application programming interface). Kirin API processes data sourced from third-party providers to remove survivorship bias (e.g., companies that have failed) and lookahead bias (e.g. making sure model consideration of earnings reporting reflects the date of publication, not as/of date of company accounting) among other data inconsistencies, to help ensure the data used in the AI model is accurate and in the right time frame. This helps reduce overfitting.
Conventional factor exposures, such as quality, size, value, momentum, and low volatility, have historically delivered excess return over market cycles. In Qraft's Factor Factory, we use auto machine learning (AutoML) technology to capture undiscovered investment opportunities, alongside conventional factor exposures, to process market data and seeks to find market factors or combination of factors that are impacting the market.
Using deep neural networks, Strategy Factory takes in factors from the Factor Factory and applies those along with market data and other forms of unstructured data, to build an investment strategy. Once the potential strategy is produced, the data is split to back test and forward test the strategy with training and test data. When the process is complete, the final portfolio is generated.
Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Fund, please call 1-855-973-7880 or visit our website at www.qraftaietf.com. Read the prospectus or summary prospectus carefully before investing.
The Funds are distributed by Foreside Fund Services, LLC
Investing involves risk, including loss of principal. The Funds are subject to numerous risks including but not limited to: Equity Risk, Sector Risk, Large Cap Risk, Management Risk, and Trading Risk. The Funds rely heavily on a proprietary artificial intelligence selection model as well as data and information supplied by third parties that are utilized by such 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 Funds may lose value. Additionally, the funds are non-diversified, which means that they may invest more of their assets in the securities of a single issuer or a smaller number of issuers than if they were a diversified fund. As a result, each Fund may be more exposed to the risks associated with and developments affecting an individual issuer or a smaller number of issuers than a fund that invests more widely. A new or smaller fund's performance may not represent how the fund is expected to or may perform in the long term if and when it becomes larger and has fully implemented its investment strategies. Read the prospectus for additional details regarding risks.
QRAFT AI-Enhanced U.S. Large Cap ETF: Companies in the health care sector are subject to extensive government regulation and their profitability can be significantly affected by restrictions on government reimbursement for medical expenses, rising costs of medical products and services, pricing pressure (including price discounting), limited product lines and an increased emphasis on the delivery of health care through outpatient services.
QRAFT AI-Enhanced U.S. Large Cap Momentum ETF: The Fund is subject to the risk that market or economic factors impacting technology companies and companies that rely heavily on technology advances could have a major effect on the value of the Fund’s investments. The value of stocks of technology companies and companies that rely heavily on technology is particularly vulnerable to rapid changes in technology product cycles, rapid product obsolescence, the loss of patent, copyright and trademark protections, government regulation and competition, both domestically and internationally, including competition from foreign competitors with lower production costs. Technology companies and companies that rely heavily on technology, especially those of smaller, less-seasoned companies, tend to be more volatile than the overall market.
QRAFT AI-Enhanced U.S. Next Value ETF: The value approach to investing involves the risk that stocks may remain undervalued, undervaluation may become more severe, or perceived undervaluation may actually represent intrinsic value. Value stocks may underperform the overall equity market while the market concentrates on growth stocks. The small- and mid-capitalization companies in which the Fund invests may be more vulnerable to adverse business or economic evens than larger, more established companies, and may underperform other segments of the market or the equity market as a whole. Securities of small- and mid-capitalization companies generally trade in lower volumes, are often more vulnerable to market volatility, and are subject to greater and more unpredictable price changes than larger capitalization stocks or the stock market as a whole.
Qraft AI-Pilot US Large Cap Dynamic Beta and Income ETF: Equity securities may fluctuate in value and can decline significantly in response to the activities of individual companies and general market and economic conditions.To the extent that the Fund temporarily invests defensively in Debt ETFs as part of its principal investment strategies, it may not be able to achieve its investment objective. The Fund’s defensive investing may not be effective in protecting its value. Generally, the value of debt securities will change inversely with changes in interest rates. To the extent that interest rates rise, certain underlying obligations may be paid off substantially slower than originally anticipated and the value of those securities may fall sharply.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 such 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.
Alpha – Alpha is a measure of the active return on an investment, the performance of that investment compared with a suitable market index.
AutoML – Short for Automated Machine Learning, AutoML is the automation of the machine learning process to make machine learning jobs simpler, easier, and faster.
Kirin API - Developed by Qraft’s data scientists, integrates multiple vendors to provide both macroeconomic and company fundamentals with the correct point-in-time data.