AI Can Manage Your Mutual Fund
Also lease accounting, AI scare trades, Terra vs. Jane Street, Blue Owl liquidity and AI blackmail.
For a while, the way normal people invested in stocks was through actively managed mutual funds. People would pool their money and give it to a skilled professional, who would buy and sell stocks to try to generate a return for the investors, and would charge a nice fee for her efforts.
Then some finance academics came along and spoiled the party. They said something to the effect of: “Look, you could just invest in the whole stock market. Buy every stock in proportion to its market capitalization, and you will get the market return. You won’t have to pay a nice fee to a professional manager, which will save you money. And you won’t get the same return that the professional manager would get — the professional manager is picking the stocks she likes, not just buying all of the stocks — but you’ll get surprisingly close, and you’ll save on fees.”1