March 25 (Reuters) - A Canadian asset manager on Monday

launched an exchange-traded fund (ETF) using artificial

intelligence (AI) rather than human beings to build a portfolio

dedicated specifically to AI.

"We'd been looking at the AI space for two years or so, and

had investors asking us to put together an AI-themed product,"

said Raj Lala, president and CEO of Evolve Funds Group Inc.

"This, surprisingly, seemed to be a space in the market that

hadn't been filled."

AI has been a white-hot investment theme for the last year

or more, and ETF issuers have eagerly rolled out new AI-focused

funds to meet investor demand. Some also have used AI's large

language model technology to construct portfolios, but have had

less success in attracting investor interest or generating

compelling returns.

None of those AI-generated portfolios target AI investments

specifically, and many of the funds don't include Nvidia ( NVDA )

or other AI stalwarts among their top holdings, noted

Todd Sohn, ETF analyst at Strategas.

The Evolve Artificial Intelligence Fund will end

up owning megacap technology stocks like Nvidia ( NVDA ) or Microsoft ( MSFT )

, Lala said. But as much as half of the portfolio will

be invested in lesser-known players like UiPath Inc. ( PATH ), a

company that makes AI software for robotics, or CorVel Corp. ( CRVL )

, which develops AI solutions to address healthcare

costs.

The biggest challenge, said Lala, was identifying those

companies. "It was like trying to figure out who'd benefit from

the Internet back in the 1990s."

Evolve uses a model developed by Boosted.ai, an AI

consulting firm serving the financial industry, to winnow

through publicly traded North American stocks in search of those

with the right kind and amount of AI exposure.

The fund will rebalance quarterly, and Lala said he doesn't

expect its largest positions will change much. That, Lala added,

should help the new ETF avoid high, costly turnover that

analysts say make other AI-powered ETFs less appealing.