Just like the Sam Altman inspired quest for the first, one-person billion dollar firm. The first billion dollar plus AUM, AI only hedge fund. Quant trading has already created multi-billion dollar Wall Street juggernauts like Renaissance Capital, and many others. A Generative AI driven hedge fund would be the next possible fintech ‘unicorn’. It’s been in the air for a while now. And we have a visible player on the field.
“Instacart co-founder Apoorva Mehta launched a hedge fund called Abundance that relies on artificial intelligence agents to make trades.”
“Thousands of bots scour the internet for trade ideas, conduct research, pick stocks, size bets, and execute trades, with the goal of having artificial intelligence run the entire fund.”
“Abundance’s team mostly trades its own capital now, but plans to take outside money and expand into other asset classes, with Mehta saying the firm’s returns have outperformed multiple indexes.”
“Instacart co-founder Apoorva Mehta launched a hedge fund that relies on an army of artificial intelligence agents, one of the few using that technology to essentially replace fundamental portfolio managers.”
“Thousands of bots scour the internet for trade ideas, conduct in-depth research, pick stocks to wager on and against, size bets and even execute trades. The 39-year-old entrepreneur started the firm, Abundance, last year with a small crew of quantitative researchers, engineers and AI experts who build and sustain AI models.”
The idea has a cohesive strategy:
“While many hedge funds incorporate AI to support human traders, Palo Alto, California-based Abundance ultimately aims to have artificial intelligence run the entire fund. The firm already already has stock-picking strategies run solely by AI, but some strategies in the works will have a degree of human involvement for now, Mehta said in an interview.”
“Still, human investors are more limited than AI, he said.”
“People “can only track so many opportunities at once, process them only so deeply, make only so many high-quality decisions,” Mehta said. “Even for the exceptional investor, the process is locked inside their mind. AI changes that entirely.”
As I said before, it’s not an untried field:
“Hedge funds have relied on automatization to some degree for decades, with quant firms like D.E. Shaw & Co. seeking to eliminate human whims from the trading process. But generative AI is dramatically shifting the work flow of a slew of industries, especially finance, and sparking commentary about whether the technology can improve on human judgment.”
And there’ve been some notable folks arguing the other end.
“Late last year, Citadel founder Ken Griffin argued that generative AI isn’t helping hedge funds beat the market and isn’t meaningfully affecting the industry yet. While Mehta said that Abundance’s returns have outperformed multiple indexes, he declined to specify which benchmarks his firm surpassed.”
It’s a ‘small’ in-house experiment for now. And a founder with expendable capital and conviction.
“Abundance’s 10-person team mostly trades its own capital right now but plans to take outside money at some point. The firm, which raised $100 million in seed equity financing, makes long and short stock bets and intends to expand into other asset classes.”
“Mehta was inspired to start the fund after OpenAI released its o3 model, which demonstrated a more advanced ability to reason through complex tasks. His team had a hunch that generative AI could be used to “make more and more consequential decisions, even capital allocation decisions,” he said.”
“He co-founded Instacart in 2012 and exited about a decade later following the grocery-delivery firm’s initial public offering. Mehta previously worked as an engineer at Amazon.com Inc., according to his LinkedIn profile. As of June 30, Mehta still owned more than 8% of Instacart, according to a filing.”
This is likely one of many more such experiments to come. Not just from either coast of the US, but other attempts around the world. AI run funds are an ‘obvious’ fintech thing to try in these early days of the AI Tech Wave.
Wow that would be amazing if it works