Investment banks, brokers, and fund managers aren’t exactly your best friends—they’re in business to make money, just like everyone else. You might gain something, sure, but that fundamental goal always looms large. So, considering that, I approach things with a bit of skepticism. Take the Xtrackers Artificial Intelligence and Big Data ETF; it seems to be performing well, but there are some important factors to weigh before diving into this relatively new AI-focused ETF.
AI is not new, but this ETF is.
The first downside to note about the Xtrackers Artificial Intelligence and Big Data ETF is its launch date—October 2024. While AI investments have been feasible for quite a while, this ETF has only existed for just over a year. For comparison, the Global X Artificial Intelligence & Technology ETF has been around since May 2018.
Historically, AI investment wasn’t particularly trendy until recently. So, the timing of the Xtrackers ETF raises some eyebrows—it feels like an attempt to ride the coattails of a potential AI bubble, making it appear as though it might be just another “me-too” offering. The intention seems clear: to grow assets for ETF sponsors.
Not a cheap product, still quite small
On the cost front, the Xtrackers Artificial Intelligence and Big Data ETF has an expense ratio of 0.35%. This is somewhat steep compared to other ETFs, where fees can dip below 0.10%. One could surmise that a significant reason for launching this ETF was the potential to set a higher cost structure. Furthermore, it currently holds around $112 million in assets, which is quite modest, especially when you consider the Global X fund’s $7.7 billion. Typically, ETFs that don’t gather enough interest may not last long.
The underlying idea of the Xtrackers ETF is solid. I mean, it offers a straightforward way to invest in over 90 distinct securities within the AI domain. However, its performance largely mirrors that of the more established Global X Artificial Intelligence & Technology ETF, making it seem less unique.
While there’s nothing glaringly wrong with the Xtrackers ETF, I can’t confidently endorse it either. Given its smaller size, it’s more prone to closure than its larger counterparts, especially if the AI hype fizzles out. Most investors might want to hold off until this ETF has had a chance to prove itself a bit more.
