AI-Powered ETF Aims to Replicate Warren Buffett's Investment Strategy

A new ETF uses AI to emulate Warren Buffett's investment style

Human investors who have tried to replicate Warren Buffett have mostly failed miserably, but now artificial intelligence is taking a crack at it. Investment startup Intelligent Alpha is working on launching the Intelligent Omaha ETF , with the ticker AIWB, that relies on AI to emulate the Berkshire Hathaway CEO's investment philosophy and create a portfolio of 25-30 stocks that it thinks Buffett might buy. So, how does it work exactly? The first step is to feed AI -- three large language models GPT, Gemini and Claude -- enough information for it to learn the essence of Buffett. That includes any publicly available writings (Buffett's famous annual letters since the 1960s), any public interviews or statements he's made, as well as regulatory filings like the 13Fs that reveal Berkshire's public equity holdings. "If you give AI a bunch of information about how you want it to think and how you want to respond and think about the world, it will play that role perfectly in our testing," Doug Clinton, Intelligent Alpha CEO and founder, said in an interview. It remains to be seen how deeply AI could understand Buffett's unique investing style that has evolved significantly over seven decades. He started out only buying "cigar-butt," dirt-cheap securities for quick profit and later, under the late Charlie Munger's influence, focused on quality companies with "wide moats" selling at fair prices. Now that Berkshire's market value approaches $1 trillion, fewer and fewer investments move the needle for the conglomerate, which partly drove Buffett to go all in on Apple. Not to mention, Buffett's reputation as one of the most shrewd and cash-rich investors enabled him to score many lucrative deals through personal negotiations, especially during crises . "The Omaha strategy is very much built around value in the context of Buffett, trying to find companies that have long duration," Clinton said. All about AI Intelligent Alpha has been testing its Buffett strategy for six months and the portfolio AI puts together would overlap Berkshire's by anywhere between 30 to 60%. The same stocks might have a different weighting in the ETF, which would charge an expense ratio of 69 basis points. The fund is set to debut sometime in the next six months. The firm already has an AI-powered ETF on the market -- the Intelligent Livermore ETF , which aims to imitate a dozen prominent investors' approaches, including Buffett, Stanley Druckenmiller and David Tepper. That fund started trading last Wednesday. These offerings mark Wall Street's latest attempt to incorporate buzzy AI applications in products to attract investors curious about what the advanced technology can produce. AI has been the hottest investment theme for the past two years, with stocks like Nvidia being the biggest beneficiaries, but many remain skeptical of its lasting power and impact on everyday life. "The vision for Intelligent Alpha is to build the AI-powered BlackRock," Clinton said. "There are two big pillars, serving retail investors [through Registered Investment Advisors], and then there's serving institutional investors."

Want to trade like Warren Buffett? New chatbot is designed to mimic the minds of the greats

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 has launched 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 started trading Wednesday. The firm, with roots in engineering and emerging technologies, will instruct the large language models 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 re-creating 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 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."