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Funds Run by Robots Now Account for $400 Billion

Smart-beta ETFs use machines to outperform humans and now account for $400 billion, but some can be less than brilliant.
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Few people have profited more from the so-called smart-beta craze than Tom Dorsey. A new exchange-traded fund that he runs using a century-old charting method took in $1.2 billion last year. Then, in January, he sold his 22-person investment firm, Dorsey, Wright & Associates, to Nasdaq OMX Group for $225 million.

Dorsey calls himself a money manager, Bloomberg Markets will report in its April issue, but his methods are more robot designer. He says so himself, proudly. If Dorsey and his team got abducted from their Richmond, Virginia, office by aliens, their algorithms could keep picking investments for the firm’s new money magnet, the First Trust Dorsey Wright Focus 5 ETF, forever.