AI Mimics Mutual Fund Trades With 71% Accuracy

A new Harvard Business School working paper suggests artificial intelligence can replicate many mutual fund managers’ trading decisions, often without placing a single trade. The research, titled “Mimicking Finance,” reports that 71% of managers’ trade directions can be predicted, based on analysis of data from 1990 to 2023 that factored in fund size, economic indicators, and investor flows. For some managers, predictions rose to nearly all trades in a quarter, especially for veterans and those in less competitive categories. Yet the study found important splits: managers with larger ownership stakes acted less predictably, and less predictable managers outperformed peers while highly predictable managers lagged. Even within portfolios, harder-to-predict positions beat easier ones.

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