The Role of Artificial Intelligence in Managing Mutual Funds’ Daily Risk

Abstract Book of the 8th International Conference on Future of Business, Management and Economics

Year: 2026

[PDF]

The Role of Artificial Intelligence in Managing Mutual Funds’ Daily Risk

Juan Carlos Matallín-Sáez, Amparo Soler-Domínguez

ABSTRACT:

Artificial intelligence (AI) is transforming the investment landscape, and exchange-traded funds (ETFs) are no exception. Owing to its capacity to process large volumes of data in real time, AI enhances asset selection, identifies market trends, and strengthens risk management with unprecedented accuracy. This study seeks to evaluate differences in performance and risk management between AI-managed ETFs and those managed by human professionals (H), drawing on a sample of 911 US equity funds, of which 7 employ AI-based management. The findings indicate that, under an unconditional model estimated over the full sample period, no statistically significant differences arise in the performance of AI and H funds, although certain discrepancies emerge in their risk factor loadings. In contrast, a conditional estimation using a monthly rolling window reveals that, on average, AI-managed funds outperform their human-managed counterparts. AI funds exhibit higher market beta and greater exposure to the momentum factor. Their performance also displays an asymmetric pattern: they tend to outperform during down markets characterized by heightened volatility, but not as markedly during strongly bullish markets. This pattern suggests superior market-timing capabilities in AI-managed funds. These results become more pronounced when the analysis is restricted to presumably more active funds (non-index funds and those with higher turnover).

Keywords: Performance; Portfolio; Timing; Managers; Turnover