(News Bulletin 247) – An investment fund promises to unlock the secrets of investments by financial virtuosos, including the most famous and respected, Warren Buffet. The Smart Omaha ETF uses AI to build a portfolio of global stocks inspired by the Oracle of Omaha.

Who has never dreamed of unlocking the secret of Warren Buffett, the most famous investor on the planet? The wise positions taken by the Oracle of Omaha, as we like to call him, allowed Berkshire Hathaway, his investment company, to reach the symbolic mark of 1,000 billion dollars in stock market value this summer.

A management company will try to make this dream come true. Recently created and led by Doug Clinton, Intelligent Alpha this month launched an ETF (an index fund) called Intelligent Omaha (AIWB). This name unequivocally refers to the boss of Berkshire Hathaway, who grew up and still lives in Omaha, a city in Nebraska. This new index fund will be based on models using Artificial Intelligence (AI) to try to replicate Warren Buffett’s very particular investment style.

Buffett-style educated AI

“The fund uses Intelligent Alpha’s proprietary stock selection strategy, powered by artificial intelligence, to create a smart, custom-weighted portfolio of global stocks with market capitalizations greater than $10 billion,” is mentioned in the prospectus filed with the SEC. the American stock market policeman.

The fund aims to invest in a basket composed of 20 to 30 stocks, selected following a process comprising three stages, including one with the intervention of a human. Firstly, an analyst in the flesh will define the desired strategy, including the target investment universe, the size of the portfolio, the planned level of concentration (for example, the maximum weighting of securities) and all specific factor or theme to be highlighted in the portfolio (e.g. dividends, quality).

Then, this is where artificial intelligence comes in. The three AI language models such as ChatGPT, Gemini and Claude will sift through numerous sources of information (such as 13F quarterly reports, public statements and interviews) relating to Warren Buffet to determine the types of stocks which correspond to his philosophy.

“Human supervision is, however, maintained to avoid errors such as choosing companies with legal or regulatory problems,” notes John Plassard, head of investments at Mirabaud.

AI in investment strategies

In the same vein, Intelligent Alpha also launched the Intelligent Livermore ETF (LIVR), also managed by advanced language models like ChatGPT, Gemini and Claude.

The name of the fund this time refers to Jesse Livermore, a legendary trader, whose journey inspired many of his contemporaries. .

“At launch, the Livermore Intelligent ETF will focus on opportunities in AI, Latin American stocks, Asian stocks, renewable energy and defensive stocks, as selected by the Livermore Investment Committee. AI,” explains Intelligent Alpha.

Like the Intelligent Omaha ETF, the Intelligent Livermore index fund uses language models “rather than traditional machine learning algorithms, which would achieve a different level of sophistication,” notes John Plassard.

“The evolution of AI to today’s broad language models, from the earlier popularity of machine learning models, has enabled the technology to provide differentiated investment analysis compared to human peers to enable a variety of investment styles,” Intelligent Alpha says.

Remember that passive management is on the rise. For example, in France, between April and the end of June 2024, the number of investors who bought or sold at least one ETF increased by 15% to reach the record figure of 248,000, according to the fifteenth edition of the Table of board of active individual investors of the Financial Markets Authority (AMF).

But beware of the larkspur. “The AI-based ETF industry is growing, although performance varies. Of the 16 ETFs tracked in the U.S., few outperform the market, with the notable exception of the Franklin Intelligent Machines ETF.” warn John Plassard.