A new fund is using AI to replicate some of the greatest investing minds in history in the hopes of supercharging client 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 securities, with a little help from humans. To put the portfolio together, human beings will feed the “committee” of LLMs a barrage of publicly available financial information combined with specific investment philosophies for the AI to follow. A strategy might focus on value over growth, for instance.
The ETF, which was named after famed 20th century stock trader Jesse Livermore, created its unique investing strategy by combining financial information with the public letters, interviews, and statements from other finance legends like Berkshire Hathaway’s Warren Buffett, as well as billionaire hedge fund managers Stanley Druckenmiller and David Tepper, among others, Intelligent Alpha CEO Doug Clinton told Fortune. And although humans actually execute the trades to avoid any hallucinations or errors, Clinton said it’s really the AI investors calling the shots.
“They can sort of replicate or pretend to be any investor. That's one of the superpowers of AI,” Clinton said. “You could have it be a super aggressive growth investor, or you could have it be a super value conscious Buffett acolyte.”
The ETF, which started trading Wednesday, counts Meta, Nvidia, and TSMC among its top holdings and has an expense ratio of 0.69%.
Before launching Intelligent Alpha, Clinton experimented first with ChatGPT, and later with other AI chatbots, to try to build a portfolio that could outperform the S&P 500. Although the LIVR ETF is the company’s first, Clinton said it intends to create a suite of AI-centered investment products aimed at both institutional and retail investors, with the goal of reaching $1 trillion in assets under management.
“We want to build the AI-powered BlackRock,” he said.
Still, for now, Clinton is the startup's only employee, and at the same time he's still working as an investor at Deepwater Asset Management, the Minneapolis-based investment firm he helped launch in 2017. Deepwater has an equity stake in Intelligent Alpha and supports the company. Although his company is a one-person show, Clinton said he's not worried.
"The power of AI is its ability to augment human productivity, and Intelligent Alpha is a testament to that," he said in an email.
Intelligent Alpha has already filed four other ETF applications with the Securities and Exchange Commission, and Clinton estimated that the company would launch more funds by the end of the year or early 2025.
Although hedge funds have already started to incorporate AI into their work, Clinton said Intelligent Alpha is among the first 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 shift in the financial world will be to AI-centered funds like LIVR, especially because this type of investing has advantages over both active and passive investing.
“It's a little bit more intelligent than just static indexes, and it's less emotional than the humans on the active side. So I think it's kind of the best of all worlds,” he said.
