A new fund is using AI to replicate some of history’s greatest investing minds in hopes of boosting clients’ portfolios.
The Intelligent Livermore exchange traded fund (LIVR), created by fintech startup Intelligent Alpha, uses OpenAI’s ChatGPT, Anthropic’s Claude, and Google’s Gemini to create a collection of stocks, with a little human help. To build the portfolio, humans will feed the LLM “committee” a deluge of publicly available financial information, coupled with specific investment philosophies for the AI to follow. For example, a strategy might favor value over growth.
The ETF, named after famed 20th-century stock trader Jesse Livermore, created its unique investment strategy by combining financial information with public letters, interviews and statements from other financial legends like Berkshire Hathaway. Warren Buffettas well as billionaire hedge fund managers Stanley Druckenmiller and David Tepper, among others, Intelligent Alpha CEO Doug Clinton said. Fortune. And while humans actually execute the trades to avoid any hallucinations or errors, Clinton said it’s actually the AI investors who make the decisions.
“They can kind of impersonate any investor. That’s one of the superpowers of AI,” Clinton said. “You can make them a very aggressive growth investor, or a very value-minded Buffett acolyte.”
The ETF, which began trading on Wednesday, Meta account, Nvidiaand TSMC among its major holdings and has a expense ratio of 0.69%.
Before launching Intelligent Alpha, Clinton experimented first with ChatGPT, and then with other AI chatbots, to try to build a portfolio that could outperform the S&P 500. While the LIVR ETF is the company’s first, Clinton said she intends to build a suite of AI-powered investment products for institutional and retail investors, with a goal of reaching $1 trillion in assets under management.
“We want to build AI BlackRock” he said.
For now, Clinton is the startup’s sole employee, and at the same time, he still works as an investor at Deepwater Asset Management, the Minneapolis-based investment firm he helped launch in 2017. Deepwater owns a stake in Intelligent Alpha and backs the company. Although his company is a one-man operation, Clinton said he’s not worried.
“The power of AI lies in its ability to augment human productivity, and Intelligent Alpha is proof of that,” he said in an email.
Intelligent Alpha has already filed four more ETF applications with the Securities and Exchange Commission, and Clinton estimated the company would launch more funds by the end of the year or early 2025.
Although hedge funds have already have started to integrate AI into their workClinton said Intelligent Alpha is one of the first companies to use AI as a “true stock picker.” To stay ahead of the competition, he said he is working at a breakneck pace to innovate.
Ultimately, Clinton believes the next big change in the financial world will be AI-centric funds like LIVR, particularly because this type of investing has advantages over both active and passive investing.
“It’s a little bit smarter than just static indexes, and it’s less emotional than humans on the active side. So I think it’s kind of the best of both worlds,” he said.