Lower transaction costs, superior stock-picking capabilities and reduced behavioural biases allow AI-powered funds to outperform human-manager peer funds, according to a new study.
The study ‘Do AI-powered mutual funds perform better‘ investigated the effectiveness of the broader AI capability in the mutual fund sphere.
The study looked at the prospectuses of 2,133 newly issued funds from 2017 to 2019 from the EDGAR database of the US Securities and Exchange Commission.
Researchers cross-referenced them with AI-powered funds using mutual fund data from the CRSP Survivor-Bias-Free US Mutual Fund Database from January 2009 to December 2019.
The study found that AI-powered funds do not outperform the market per se, but a comparison shows they “significantly” outperform human-managed peer funds.
The study further shows that the outperformance of AI funds is attributable to their lower transaction cost, superior stock-picking capability and reduced behavioural biases.
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