Here are some thoughts on the Impact of generative AI on Fundamental and Value Investing Shops:
Traditionally, specialists have won on depth, while generalists focused on breadth. But GenAI is erasing that boundary: a 12-hour grind to analyze a new idea by a generalist analyst now takes 12 minutes, thanks to LLMs.
An experienced generalist analyst or PM can now evaluate up to 60x more ideas. The result is that small, generalist-driven funds can scale far more easily (at least up to a point).
In the old model, a PM with three analysts might analyze 20 ideas a year and manage around $50 million. Now, one PM and one analyst could cover hundreds of ideas, pick more promising names, deliver stronger absolute returns, and grow AUM.
However, this scalability has limits. Beyond a certain point, firms will need to invest heavily in:
- Compliance infrastructure (costly but essential)
- Corporate access and relationships
- Alternative data, which is expensive but increasingly vital
- Systems and headcount, adding overhead as the fund grows
GenAI reduces the analytical bottlenecks, but scaling a fund will still require human capital, infrastructure, and access.
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