The study was conducted by a UK-based fintech company called Irithmics, that analyses AI and its effect on markets. It estimated that more than $10bn worth of the company’s holdings are potentially vulnerable to activity by short-selling hedge funds.
Irithmics, which uses deep-learning AI to study market data, will publish its analysis of Berkshire Hathaway’s public holdings later in 20187 The findings will highlight the investments that are at risk on account of hedge fund positions.
The company which tracks more than 6,000 investment manager portfolios, estimated that there was a 20% chance that losses to Berkshire Hathaway caused by bearish short-term trading will exceed 6%, according to Financial News.
This amounts to $11.5bn, based on a company filing last August that valued its total holdings at $193.2bn.
In terms of trading positions, Berkshire Hathaway also estimated there is a 20% chance that profits associated with more bullish shorter-term trading behaviour will exceed 9%.
Grant Fuller, chief executive of Irithmics stated: “Of the positions that Berkshire Hathaway has disclosed to the Securities and Exchange Commission, AI is able to determine the ones that are most vulnerable to the activity of hedge funds or short-term traders.”
“What Irithmics’ technology is able to do, by looking at all available market data, is show Warren Buffett and Berkshire Hathaway that $10bn of the portfolio is at risk due to the activity of hedge funds.” He added.
Berkshire Hathaway was ranked the 19th most popular stock for hedge funds to own, in a study by WalletHub, the personal finance website last February.
Regulatory filings state that hedge funds that have positions in Berkshire Hathaway include AQR Capital Management, Renaissance Technologies and Cedar Hill Associates. Hedge funds that have sold Berkshire Hathaway in recent years include Ray Dalio’s Bridgewater. According to a quarterly filing, the firm sold its stake in June 2014.
None of the hedge funds responded to requests for comment.
Buffett has recently been bullish on Apple, becoming the tech company’s second-biggest shareholder. According to FactSet, the research group, Berkshire Hathaway owned 239.6mn Apple shares at the end of the March quarter.
Fuller stated: “AI technology has recently been predicting selling pressure driven from hedge funds in relation to Apple stock.”
Buffett is also a noted AI skeptic. He has also repeatedly criticised hedge funds, which he views as providing poor value for money and offering relatively low returns. Last February Buffett won a decade-long $1m bet for charity that a basket of hedge funds would fail to outperform the S&P 500 index over a 10-year period.
Berkshire Hathaway did not respond to requests for comment.