MALVERN, PA — Pacer ETFs recently launched two exchange-traded funds built around artificial intelligence-driven stock selection models as asset managers continue expanding AI-based investment products aimed at identifying excess market returns.
The new funds — the Pacer S&P 500 3AI Top 100 ETF and the Pacer S&P World 3AI Top 300 ETF — track newly created indices developed with S&P Dow Jones Indices and investment technology firm 3AI.
The strategies use machine learning models to rank companies based on projected 12-month excess return potential, commonly referred to as alpha.
The U.S.-focused fund selects 100 companies from the S&P 500 with the highest AI-generated scores, while the global fund selects 300 companies from developed international markets included in the S&P World Index.
Pacer said the products are designed to offer a rules-based alternative to traditional active management and factor-based investing strategies.
Sean O’Hara, president of Pacer ETF Distributors, described the funds as an effort to provide investors with additional return-generation tools beyond conventional passive strategies.
3AI’s investment process analyzes company fundamentals, macroeconomic indicators and market data through machine learning models that generate forward-looking forecasts for expected stock performance.
The forecasts are then incorporated into index construction through governance and oversight procedures maintained by S&P Dow Jones Indices, including sector limits, security caps and periodic rebalancing.
Rupert Watts, head of factors and dividends at S&P Dow Jones Indices, described the products as AI-enhanced benchmarks designed to identify companies with the strongest projected excess return potential.
The launches add to a growing wave of AI-linked investment products entering the ETF market as firms increasingly market machine learning-driven approaches to portfolio construction and equity selection.
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