(Bloomberg) -- It might just be the most audacious bid on Wall Street to exploit newfangled AI tools to mimic the legends of finance.
Fintech startup Intelligent Alpha is launching a chatbot-powered ETF that promises to harness the brainpower of the investment world’s most illustrious minds — Warren Buffett, Stanley Druckenmiller, David Tepper, and more.
With the not-so-subtle moniker — the Intelligent Livermore ETF – the product is built around investment ideas generated by ChatGPT, Gemini and Claude, dubbed the “investment committee,” that are set to be inspired by the thinkings and doings of the famed money managers. It starts trading on Wednesday.
The firm, with roots in engineering and emerging technologies, will instruct the large language models (LLMs) to emulate the investors’ personalities. The trio of chatbots will spit out 60 to 90 global firms that span a number of sectors, themes and geographies, including health care, renewables and Latin America, to name just a few.
The list of personas targeted by the ETF — besides Buffett, Druckenmiller and Tepper — will include Dan Loeb, Paul Singer and others, though the fund’s holdings may not necessarily reflect the real-life bets by those investors.
“If you think about the hedge-fund world today, that has pods that each focus on specific areas of expertise,” said Doug Clinton, Intelligent Alpha’s CEO and founder. “In a sense, we’re recreating the very basics of that structure where we have these different inspirations for investors we really respect.”
While the product’s ambitions stand out as particularly bold — even for the buzzy world of ETF investing — it’s Wall Street’s latest attempt to weaponize AI to create new riches for investors of all stripes. Some hedge funds already use chatbots for research and investing processes and say that AI can significantly cut down time spent on menial tasks.
The overall idea still remains largely experimental and untested. Little evidence exists that AI is disrupting and displacing investing units en masse, and much has yet to be resolved when it comes to issues like chatbots making things up in their answers.
There’s also no proof just yet that investments chosen by AI have a leg up over passive investing. Of the 16 AI-centered ETFs in the US tracked by Bloomberg Intelligence, just one is outperforming the S&P 500 this year: the Franklin Intelligent Machines ETF (ticker IQM). The fund returned 19% while the stock index gained 18% as of last close.
Further, only one — the Global X Artificial Intelligence & Technology ETF (AIQ) — has seen meaningful inflows, taking in more than $1 billion this year. That’s followed by a $117 million haul for the Roundhill Generative AI & Technology ETF (CHAT). The rest have seen tiny inflows or outright outflows year-to-date.
Clinton says that many of the other AI-centered ETFs tend to rely on traditional machine-learning techniques and might not yet be incorporating LLMs like his fund. “That limits those strategies to the crowded market of quantitative insights,” he said.
The idea for the ETF arose last year when Clinton started experimenting with ChatGPT to create a portfolio that could beat the S&P 500, which he says he had luck doing. Over time, his tinkering turned into 40 different strategies whose performances are measured against various indexes, and led to the founding of Intelligent Alpha.
The company, an affiliate of Deepwater Asset Management, is an independent registered investment adviser that’s built to use large-language AI models for portfolio management. The ETF is its first fund, but the firm will look to launch a suite of products that also includes custom portfolios and hedge funds, according to Clinton.
It will also aim to tailor its offerings to both retail and institutional investors. Intelligent Alpha has already filed for other ETFs as well.
Minneapolis-based Deepwater — formerly known as Loup — manages roughly $400 million across venture capital and public equity funds. Alongside Clinton, it was co-founded by the well-known tech analyst Gene Munster.
The new AI ETF pays homage to Jesse Livermore — one of the early 20th century’s most legendary stock traders — with its ticker LIVR. It charges a 0.69% fee, and may invest in a company that Buffett’s Berkshire Hathaway conglomerate, for instance, does not hold. The fund does, however, have final human oversight.
“Just to make sure there’s not some sort of a hallucination in the portfolio, like a company that committed fraud or some egregious issue,” Clinton said. “And also that the portfolio will meet any regulatory or compliance constraints that we might know about that the AIs may not be thinking about when they create the portfolio.”
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