DWS launched an equity fund on 31 March 2021 whose stock selection is largely based on the use of artificial intelligence (AI). The DWS Concept ESG Arabesque AI Global Equity picks up on the three megatrends that DWS has identified for the coming decade: Low interest rates, sustainability and digitalization.
The fund is the first joint product of DWS and Arabesque AI, a British company specializing in artificial intelligence with which DWS entered into a strategic partnership at the beginning of 2020. It takes ESG criteria into account, pursues a total return approach and comprises between 60 and 70 stocks from the MSCI World universe. The expected tracking error is between six and seven per cent.
Arabesque’s AI approach is characterized by the fact that it is very comprehensive and not limited to individual markets, investment styles or asset classes. This distinguishes it from many of its competitors.
“With the product, we combine the advantages of artificial intelligence with the expertise of our investment managers in an actively managed investment fund. By combining the unique strengths of both partners, we can better analyze the exponentially growing amount of data through innovative technologies to derive new insights,” says Manfred Bauer, head of the product division at DWS.
Yasin Rosowsky, co-CEO of Arabesque AI, adds: “Advancements in AI technology are driving transformation of the global marketplace. The launch of the DWS Concept ESG Arabesque AI fund is the result of a strong collaboration between Arabesque and DWS, combining DWS’ fund management expertise with Arabesque’s AI capabilities to co-develop a cutting-edge investment product. We are delighted to be partnering with DWS on this exciting new offering.”
The following figures show how explosive the issue of increasing data volumes is: In 2009, the number of new data was still 0.5 zettabytes (one zettabyte corresponds to 1,073,741,824 terabytes), in 2019 it will already be 45 zettabytes. For the year 2025, experts expect new data amounting to 175 zettabytes, i.e. 350 times the amount of 2009. For the human brain, this development is a big problem, but for artificial intelligence, the more information, the better.
Artificial intelligence will increasingly take on an important role in asset management. However, it will not completely replace analysts or fund managers. In the DWS Concept ESG Arabesque AI Global Equity, the interaction of AI and humans means that the AI engine generates a large number of signals every day that indicate the attractiveness of stocks. DWS’s quantitative investment specialists use these to build a portfolio that is diversified regionally and across sectors, and review it on a monthly basis.