AI-Powered ETFs: Exploring the Next Evolution in Investing with Jack Fu, CEO of Draco Evolution

Artificial Intelligence (AI) is revolutionizing Exchange-Traded Fund (ETF) management, enabling smarter, more adaptive investment strategies. From optimizing portfolio construction and risk management to automating rebalancing and analyzing market sentiment, AI equips investors with powerful tools to navigate complex financial markets.

Jack Fu, CEO of Draco Evolution, is leading this shift by building the most sophisticated AI-driven ETF strategies in the market. In this conversation, Jack discusses the technology behind DRAI’s approach and where he sees AI-driven investing heading. He tells you why there is a need to balance innovation with transparency and what that means when it comes to achieving success.

His perspective also offers valuable lessons for CTOs and technology leaders on how AI can reshape products, decision-making, and trust across industries.

To begin with, can you tell us a little about your journey—what brought you to lead this company? How would you describe your company’s mission in one or two sentences? And what excites you most about leading this organization right now?

Jack Fu: I started out as a financial advisor. In 2008, I witnessed firsthand the devastating impact of market downturns on everyday investors, and I realized there had to be a more innovative, safer way to manage risk. After decades of designing institutional quant strategies, I teamed up with YouTube cofounder Steve Chen to build Draco Evolution. Following the success of our AI ETF, which has outperformed the S&P, we’re now bringing those hedge-fund-grade tools directly to Main Street through Dravo, our new retail investing app.

How do you see AI changing the fundamental way ETFs are conceived and built compared to traditional methods?

Jack Fu: Traditional ETFs are static—they track indexes or rebalance on a set schedule. Our AI ingests over 1,000 signals daily and reallocates in real time, which is why the DRAI ETF has consistently beaten the market. That level of adaptability transforms ETFs from backward-looking trackers into forward-leaning, resilient strategies.

In your view, does AI mark the beginning of a new era for passive investing, or is it blurring the lines with active management?

Jack Fu: AI is reshaping the very definition of what an ETF can be. Passive is efficient but inflexible; active is responsive but costly. AI allows us to deliver both—rules-based discipline with continuous adaptation. We call it adaptive investing, and I believe it will define the next decade of ETFs.

Can you share some insights on DRAI’s approach?

Jack Fu: The way I explain our process is straightforward. First, we ask where the market wind is blowing. The system studies price and volume day by day, and it also listens to the economy. We bring in signals such as the OECD leading indicator, employment, new orders, the yield curve, money conditions, and consumer expectations. Taken together, that gives us a probability view of whether the next stretch looks more risk on or more risk off. It turns noise into something we can act on, without relying on gut feeling.

Once we have a direction, we size the exposure right way. Our quantitative allocation engine works within clear guardrails for risk, liquidity, and single-asset limits, and then solves for a mix that suits the moment. When conditions favor growth, the portfolio leans toward equity return sources. When conditions become cautious, the weight shifts toward treasuries, gold, and cash, with hedges when needed. If the macro picture supports the market read, we press a little harder. If the two disagree, we ease off and keep flexibility.

Risk control is the last piece. We track current realized volatility against a normal baseline. If short-term volatility jumps while the backdrop is weak, a safety valve kicks in and a small sleeve moves into defensive or short exposure. The goal is to keep drawdowns more manageable.

Think of it like an automatic transmission. On a smooth road, the car speeds up naturally, and when the road gets rough, it drops a gear and keeps traction. We saw this help during the policy shock earlier this year, when broad equities dipped and our process kept losses smaller than the market.

As always, past results do not guarantee future returns, but with a disciplined regime view, macro confirmation that includes the OECD signals, and a quantitative way to find a suitable mix, we can be brave when the setup is good and protective when it is not.

Could you tell us how your team’s technology adapts automatically to changing conditions, and what it means during recent volatility?

Jack Fu: Volatility is where our edge shows. During recent swings, the system tilted away from high-risk sectors and into defensives within days. Unlike robo-advisors that rebalance quarterly or apps built for YOLO trades, our AI never sleeps—it’s recalibrating constantly to keep portfolios resilient.

What feedback are you hearing from investors about AI-powered ETF products?

Jack Fu: Investors don’t just want returns, they want to understand, learn and build confidence as they go. The Dravo app is built for exactly that: simplifying complexity, teaching as it trades, and giving individuals the structural advantages once reserved for hedge funds.

How do you balance innovation with transparency so investors can trust AI-driven strategies?

Jack Fu: Transparency is critical. With Dravo, users can see their allocations, track performance drivers, and get plain-English explanations of why the AI acted. You don’t need to see the code, but you do need to see that the process is disciplined, repeatable, and accountable.

Where do you see the ETF industry in 5–10 years as AI adoption accelerates?

Jack Fu:  AI will become table stakes. The ETFs of the future won’t just mirror indexes – they will adapt in real time. Investors will expect products that are resilient, educational and personalized. I see Dravo as part of that evolution—putting Wall Street-grade AI into the hands of everyday investors.

What advice would you give to other leaders who are just starting to explore AI in ETF construction?

Jack Fu: Start with a real investor problem, not hype. In our case, it was how to protect portfolios when markets fall, not just chase returns when they rise. Pair innovation with transparency, because trust is the real differentiator.

Closing thoughts

This conversation is a timely reminder that those who embrace AI today will be best positioned to lead tomorrow. For CTOs and technology leaders, the takeaway is clear: the ability to build scalable, transparent, and resilient AI systems will define the next era of innovation—whether in finance or any other industry.