How AI is already empowering investment research and product development

Academics have hinted at the potential for AI in knowledge-based occupations, and we’re already seeing it at work among portfolio managers, analysts, and industry experts on the Thematic platform. 

We don’t expect that many managers will want to hand the keys to Claude, Gemini, and Chat GPT (even though it’s already happened in at least one case, with the debut of the Intelligent Alpha’s Livermore ETF (LIVR) last month). But we have seen an inspiring wave of creativity from financial professionals.

Read on for a closer look at some potential frameworks for building AI into your workflows, as well as a number of real world examples of how Thematic could help you make an impact.

A word about Thematic

Before diving into what people are developing using Thematic, we wanted to give you a quick sense of how our platform works. 

Specifically, we start with financial and market data from Factset, a proprietary SEC pipeline, and public filings. Using a multi-LLM model, the public-facing environment we’ve built lets analysts and researchers perform three basic functions:

• Perform in-depth company research and evaluations
• Develop cross-industry company insights based on any investment theme, or
• Build and test an index or lists of securities they manage, track, and share with their colleagues.

If you’d like, you can explore the query above here.

For professional investors who want to dive even deeper, the Thematic platform is flexible enough to accomplish a lot more. We can build customized workflows and interfaces, incorporate and analyze your proprietary data, or we can even help build custom indices and distribute to publishers like Bloomberg.

How can AI optimize the research process?

AI-powered features and functionality can streamline months of work in minutes so your team can focus on what you do best. You can initiate research faster, get instant answers to complex questions, and make sure you’ve turned over every stone before making decisions.

Getting a little more specific, these are some of the top use cases we’re seeing (so far):

To give you more of a sense of what’s possible, we wanted to share some of the most effective uses we’ve seen for exploring and monetizing different investment themes with Thematic. 

Not all of these use cases represent actual investment products, but they show the types in-depth, insightful analysis that managers can use to build better products faster.

WGA Bank Indices, by Whalen Global Advisors

A leading industry expert, Chris Whalen felt that the legacy banking index — KBWB — was not accurately measuring modern banking businesses. Using a proprietary weighting system based on scoring his team created, he used Thematic to build Whalen’s bank indices (WBLW). It tracks the top publicly traded banks in the US above $10 billion in total assets. 

Whalen leverages the index in a number of ways to market its work as an advisor to institutional investors and family offices, and it also sells subscriptions to a banking industry newsletter and access to the index as standalone products.

The Pink Chip Indices, by AKQA

Just 6% of publicly-listed companies are run by women, so design firm AKQA partnered with Thematic, trading platform DEGIRO, and UN Women NL to develop an index that could help combat the bias against female leadership. 

By using AI to quickly identify female-led companies, Thematic turned a painstaking research task turned into a simple set of queries — and The Pink Chip Index (PINKCHIP) went on to draw attention from esteemed publications like the Harvard Business Review and The Washington Post. 

Land and Expand Leaders Index, by Lenny Rachitsky

Developed by Lenny Rachitsky — who pens Lenny’s Newsletter to dissect product-led growth strategies for almost a million tech employees and investors — the LENNY index is designed to track the performance of companies that have world-class “land and expand” business models.

As an industry expert, Rachitsky knew that non-GAAP financial metrics like Net Dollar Retention (or Net Revenue Retention) are core KPIs among the business-to-business (B2B) software as a service (SaaS) companies he covers. It’s a KPI that would be very timing consuming to gather and update, but Thematic made it possible.

LENNY relies on Thematic to employ Rachitsky’s rigorous methodology for identifying and weighting best-in-class SaaS companies. The makes index frequent appearances in his newsletter — and Bloomberg is even tracking it alongside other indices.

Using a similar approach, Stocktwits co-founder Howard Lindzon developed, tracks, and manages the Degenerate Economy Index (DEGENCOM) on Thematic. It seeks to track “the next phase of investing where the lines between trading, ownership, and gambling blur, and it all happens in the palm of your hand.“ From the Mag 7 to crypto to gambling and semiconductor stocks, his index follows the companies that tend to capture the imagination of younger investors (despite what their fundamentals might say).

Yet another industry expert, REIT Data Market has partnered with Thematic to test real estate’s “location, location, location” axiom. Its series of indices track the performance of REITs in different geographical areas.

The Intelligent Livermore ETF, by Intelligent Alpha

We already mentioned the now-live LIVR ETF, but this ETF is notable for more than just using AI. The really interesting innovation that underpins this fund is how Intelligent Alpha uses AI to identify, weight, and manage its components.

Named after a mythical early-20th Century stock trader named Jesse Livermore, this ETF was built by an ”AI investment committee to identify opportunities inspired by the world’s greatest investors and traders.” Though Intelligent Alpha doesn’t name names, the goal is to replicate the thinking of luminaries like Warren Buffet (and of course Jesse Livermore) in a way that an algorithm can’t. 

Thematic was excited to partner with the Intelligent Alpha team, and to see positive responses from people like Matt Levine. For a deeper dive on this strategy — and other applications for AI in product development — we recommend checking out this conversation between Intelligent Alpha founder Doug Clinton and our own Steve Carpenter on the Deload podcast.

The big takeaway for portfolio managers?

We’re seeing more and more support for our thesis that AI presents you and your team with countless new ways to look at the world when you build a fund. From fund managers to industry experts, we’ve seen AI speed up basic fundamental research and create contextual connections that don’t show up in the numbers. We’ve made it much easier to cross-reference data sources, blend qualitative and quantitative research, and inform key decisions with a lot more context.

Try performing basic research to see how quickly Thematic can take you from 0 to 1. Or if you’d like to dig into how we can work with your team to develop a competitive advantage, we'd love to talk.