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Australia’s top investment funds vs ChatGPT and Bard
We compared the performance of Australia's top investment funds against AI-designed portfolios.
Quick overview
A portfolio created by ChatGPT holding 23 stocks has risen 4.15% since 11 May 2023, when the test started
The Bard portfolio holding 19 stocks has risen 7.15% on average over the same time frame
The top 10 listed managed funds in Australia rose 5.31% on average
All performance figures are to November 17, 2023
Comparing the market
We wanted to see how our AI portfolios performed against the market. To compare, we looked at the performance of the benchmark indices from Australia and the US – the S&P/ASX 200 index and S&P 500 index:
The S&P 500 index has risen 9.28% since 11 May 2023, outperforming the top 10 hedge funds plus our ChatGPT and Bard portfolios
The ASX 200 index has fallen -2.79% in that same time and is the worst performing of the portfolios we tested
Which stocks did ChatGPT select?
We asked ChatGPT to create a stock portfolio using the main investment strategies and approaches used by the top 10 managed funds in Australia.
Criteria included high-quality businesses trading below their intrinsic values, high profit margins and a sustainable competitive advantage.
Following our prompts, it selected 23 stocks, mostly from the United States and many household names. ChatGPT's portfolio was diversified across sectors and included some stocks from Australia, the UK and parts of Asia.
US equities made up 69.6% of the portfolio
EU/UK equities (4%)
APAC/Asia equities (13%)
Australian equities (13%)
ChatGPT was also able to provide a simple summary of why it selected it's stocks based on the given criteria:
Alphabet Inc. (GOOGL) – dominant position in search and online advertising with considerable future growth opportunities in cloud computing and AI.
Amazon.com Inc. (AMZN) – leading ecommerce platform with a growing presence in cloud services, digital entertainment and more.
Microsoft Corporation (MSFT) – strong economic moat in software, cloud computing and hardware; consistent financial performance.
Apple Inc. (AAPL) – innovative tech giant with a loyal customer base, diverse product portfolio and significant growth in services.
Visa Inc. (V) – leading global payments network that benefits from increased global digitisation.
Johnson & Johnson (JNJ) – diverse healthcare firm with steady cash flow, strong R&D capabilities and an expansive product portfolio.
Procter & Gamble Co. (PG) – consumer goods giant with a portfolio of strong, well-recognised brands.
Berkshire Hathaway Inc. (BRK.B) – diverse holding company with investments in high-performing businesses across sectors.
UnitedHealth Group Incorporated (UNH) – largest health insurer in the US, with a diverse set of healthcare services and products.
Unilever PLC (ULVR.L) – globally diversified consumer goods company with a range of strong brands and focus on sustainability.
Roche Holding AG (ROG.SW) – leading innovator in pharmaceuticals and diagnostics with a strong R&D pipeline.
ASML Holding NV (ASML.AS) – monopolistic position in photolithography systems essential for semiconductor production.
Samsung Electronics Co., Ltd (005930.KS) – global leader in diverse technology segments including semiconductors, mobile phones and consumer electronics.
Alibaba Group Holding Limited (9988.HK) – dominant ecommerce platform in China with diversified operations across cloud computing, digital media and more.
TSMC (Taiwan Semiconductor Manufacturing Company) (2330.TW) – the world's leading semiconductor foundry, critical for global tech supply chain.
Commonwealth Bank of Australia (CBA.AX) – largest bank in Australia, known for strong performance, customer base and adoption of digital banking technologies.
CSL Limited (CSL.AX) – leading biotherapy company globally, with a solid track record of delivering high-quality products.
Wesfarmers Ltd (WES.AX) – diversified corporation with solid investments in retail, chemicals and industrial safety sectors.
SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL) – provides exposure to short-term US Treasury bills and offers low-risk income potential.
iShares Short Treasury Bond ETF (SHV) – invests in short-term US Treasury bonds and offers stability and liquidity.
Which stocks did Bard select?
We used the same approach with Bard as we did with ChatGPT. We asked Bard to create a stock portfolio consisting of the main investment strategies and approaches used by the top 10 managed funds in Australia.
Our criteria included high-quality businesses trading below their intrinsic values, high profit margins and a sustainable competitive advantage.
Following our prompts, it selected 19 stocks, mostly from the US and largely within the technology sectors.
US equities: 68.4%
UK/EU equities: 21%
APAC: 10.5%
How did we select the top funds?
To put fund managers to the test, we took the 10 most popular actively managed listed funds on the ASX as our benchmark. Popularity was rated in terms of funds under management.
Although the most popular funds in Australia are passive index funds, we also excluded these from the list because these types of funds seek to simply mimic a market, rather than outperform it.
For a fair comparison, we only included funds that offer stock portfolios and excluded any single industry thematic funds.
Funds included in our top list were the Magellan Global Open Class Units fund (MGOC), Vanguard Global Value Equity Active ETF (VVLU) and BetaShares Australia Top20 Equity Yield Maximiser Fund (YMAX). While some of these funds did individually outperform each of our competitor portfolios, the average performance of all 10 funds did not.
Important: Our test only looks at performance across a relatively short period of time. The performance of any one fund, portfolio or index during this time might not reflect its performance over the long term. Past performance is also no guarantee of future results.
Methodology
We asked Bard and ChatGPT to create an investment portfolio of 23 global stocks based on the main criteria used to create the top 10 managed funds.
To mimic the top funds we asked for the portfolios to have the following criteria:
Sustainable businesses trading below their intrinsic values
A sustainable competitive advantage within their sector
Management with a strong track record
A history of reliable cash flow and earnings and projections for continued growth
A history of reinvesting profits at high incremental rates of return
Higher-than-average profit margins
Primarily stocks from developed markets with at least a portion from Australia
We used 23 as our target number of holdings because this was the median number of holdings by the 10 benchmark-managed funds, excluding any outliers
For our Bard and ChatGPT portfolios, we assumed holdings were equally weighted
We requested a small exposure to cash to mimic the cash levels held by the top funds
Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades. Read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) for the product on the provider's website.
Kylie Purcell is the senior investments editor and analyst at Finder. She has completed a Certificate of Securities and Managed Investments (RG146) and specialises in investment products including online brokers, robo-advisors, stocks and ETFs.
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