Warren Buffett and David Tepper Team Up to Create New Chatbot ETF

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It may be Wall Street’s boldest bid to exploit new technologies. AI tools to imitate the legends of finance.

Fintech startup Intelligent Alpha launches a Chatbot powered ETF which promises to harness the intellectual power of the most illustrious minds in the investment world — Warren BuffettStanley Druckenmiller, David Tepper and many others.

Under the unsubtle name Intelligent Livermore ETF, the product is built around investment ideas generated by ChatGPT, Gemini and Claude, dubbed the “investment committee,” which is expected to draw on the thoughts and actions of the famous fund managers. It begins trading on Wednesday.

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The company, which has its roots in engineering and emerging technologies, will ask large language models (LLMs) to mimic the personalities of investors. The trio of chatbots will produce 60 to 90 global companies that span a number of sectors, themes and geographies, including healthcare, renewable energy and Latin America, to name a few.

The ETF’s target list — in addition to Buffett, Druckenmiller and Tepper — will include Dan Loeb, Paul Singer and others, though the fund’s holdings don’t necessarily reflect those investors’ actual bets.

“If you think about the hedge fund world today, you’ll see that there are groups that are each focused on specific areas of expertise,” said Doug Clinton, CEO and founder of Intelligent Alpha. “In a sense, we’re recreating the very foundation of that structure, building on these different inspirations for investors that we really respect.”

While the product’s ambitions are bold even for the buzzy world of ETF investing, it’s the latest attempt by Wall Street to weaponize AI to create new wealth for investors of all stripes. Some hedge funds are already using chatbots for their research and investment processes, and say AI can dramatically reduce the time spent on menial tasks.

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The general idea remains largely experimental and untested. There is little evidence that AI is disrupting and replacing investment units in a massive way, and there is still much to be solved when it comes to problems like chatbots making things up in their responses.

There’s also no evidence that AI-driven investments are outperforming passive investing. Of the 16 U.S. AI-focused ETFs tracked by Bloomberg Intelligence, only 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 its last close.

Additionally, only one ETF – the Global X Artificial Intelligence & Technology ETF (AIQ) – has seen significant inflows, taking in more than $1 billion this year. This is followed by a $117 million gain for the Roundhill Generative AI & Technology ETF (CHAT). The other ETFs have seen minimal inflows or outright outflows since the start of the year.

Clinton said many other AI-focused ETFs tend to rely on traditional machine learning techniques and may not yet incorporate LLM like his fund does. “That limits these strategies to the crowded market of quantitative information,” he said.

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The idea for the ETF was born last year when Clinton began experimenting with ChatGPT to create a portfolio that could beat the S&P 500, which he says he succeeded in doing. Over time, his attempts have evolved into 40 different strategies that measure their performance against various indices, leading to the creation of Intelligent Alpha.

The company, a subsidiary of Deepwater Asset Management, is a licensed independent investment advisor designed to use broad-language AI models for portfolio management. The ETF is its first fund, but the company will look to launch a suite of products that also includes custom portfolios and hedge funds, according to Clinton.

The company’s goal is also to tailor its offering to retail and institutional investors. Intelligent Alpha has already filed applications for other ETFs.

Deepwater, formerly Wolf, is a Minneapolis-based company that manages about $400 million in venture capital and private equity funds. It was co-founded by Gene Munster, a prominent technology analyst, and Clinton.

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The new AI ETF pays tribute to Jesse Livermore, one of the most legendary stock traders of the early 20th century, with its ticker LIVR. It charges a fee of 0.69% and can invest in a company that Buffett’s Berkshire Hathaway conglomerate, for example, doesn’t own. The fund does, however, benefit from final human oversight.

“You just have to make sure that there’s no hallucination in the portfolio, like a company that’s committed fraud or something serious,” Clinton said. “And also that the portfolio will meet any regulatory or compliance constraints that we might know about that the AIs might not have thought about when they’re creating the portfolio.”

Bloomberg.com

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