Warren Buffett, David Tepper’s Brainpower Fuels New Chatbot ETF
In an ambitious move, a new exchange-traded fund (ETF) is being launched that leverages the collective brainpower of investing legends Warren Buffett and David Tepper to make investment decisions. The Intelligent Alpha LIVR ETF, which pays homage to Jesse Livermore – one of the early 20th century’s most legendary stock traders – with its ticker LIVR, aims to outperform the S&P 500 index through the use of large-language AI models.
Background
The idea for the ETF arose last year when Gene Munster, co-founder of Minneapolis-based Deepwater Asset Management, started experimenting with ChatGPT to create a portfolio that could beat the S&P 500. 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 Concept
Intelligent Alpha is an independent registered investment adviser 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. It aims to tailor its offerings to both retail and institutional investors.
Unique Selling Point
The new AI ETF charges a 0.69-per-cent fee and may invest in companies not held by Buffett’s Berkshire Hathaway conglomerate. However, the fund has final human oversight to ensure that there are no "hallucinations" in the portfolio, such as investing in a company that committed fraud or some egregious issue.
Challenges
The overall idea 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. Moreover, there’s no proof just yet that investments chosen by AI have a leg up over passive investing.
Performance
According to Bloomberg Intelligence, only one AI-centered ETF – the Franklin Intelligent Machines ETF (ticker IQM) – has outperformed the S&P 500 this year, returning 19 per cent while the stock index gained 18 per cent as of last close. Furthermore, only one – the Global X Artificial Intelligence & Technology ETF (AIQ) – has seen meaningful inflows, taking in more than US$1 billion this year.
Potential Impact
The launch of Intelligent Alpha LIVR ETF highlights the growing trend of AI-powered investment strategies. While it remains to be seen whether these approaches will ultimately deliver better returns, they are certainly generating significant interest among investors and industry professionals alike.
Conclusion
As the investing landscape continues to evolve, it’s fascinating to see how innovative concepts like AI-powered ETFs are pushing the boundaries of what’s possible in terms of investment strategy. While there are still many questions surrounding the effectiveness and potential pitfalls of these approaches, one thing is clear: Intelligent Alpha LIVR ETF is an ambitious entrant into a rapidly changing market.
Key Points:
- The Intelligent Alpha LIVR ETF aims to outperform the S&P 500 index through the use of large-language AI models.
- The fund is built on the idea that collective brainpower can lead to better investment decisions.
- It has final human oversight to ensure that there are no "hallucinations" in the portfolio, such as investing in a company that committed fraud or some egregious issue.
- There’s little evidence to support the claim that AI-powered ETFs outperform passive investments.
- Only one AI-centered ETF – the Franklin Intelligent Machines ETF (ticker IQM) – has outperformed the S&P 500 this year, returning 19 per cent while the stock index gained 18 per cent as of last close.