HIAI charges 87 basis points to enter a category where eight of 21 funds have folded

The three-year screen and the fee interact. At 0.87% a year ^[9], HIAI pays out 2.61 percentage points in fees across the three years it needs to build a record that big broker-dealers will look at ^[19], so the model has to beat the S&P 500 by roughly that much gross over the window just to arrive level with it net. Loren Fox, research director at FUSE, said "Ultimately, to really succeed, you need to put together a three-year track record that big broker dealers look at faithfully" ^[11]. Fidelity puts the 2025 average expense ratio for active ETFs at 0.74% ^[10]. HIAI is 13 basis points above that ^[18], and four analysts told ETF Upside the fee is unusually high ^[9].

One year of returns has not moved money in this category. The five funds that beat the index over the past twelve months sit inside the same seven that had outflows across the year-to-date, one-year and three-year windows Morningstar measured ^[13][14].

Eight of the 21 funds launched in the category have folded, or 38% of them ^[15][20]. That leaves 13 that did not fold, against the seven Morningstar counts as currently trading, so six of the 21 appear in neither figure ^[21].

HIAI's model selects and manages the portfolio with human oversight, which the Daily Upside describes as fairly unique among funds that use AI ^[3]. The prospectus sets the target as beating the S&P 500 over a full market cycle, with risk adjusted on market signals ^[2]. Tal Schwartz, the founder, said "We chose that as our benchmark for HIAI because it is so difficult" ^[7], and he put the timetable for AI-managed funds becoming a third option beside active and passive ^[4] a long way out: "It will still be years and possibly decades for that to happen because the industry is conservative and they will want to see the proof in the pudding," he said ^[5].

Athanasios Psarofagis, an ETF analyst at Bloomberg Intelligence, said "I just don't know how this is going to find something that the overall market won't" ^[16]. In my view the harder problem for Ai Funds is distribution: five funds beat the hardest benchmark in the market for a year and lost assets anyway ^[13][14]. The counter-thesis is that twelve months of a 40-to-60-stock portfolio ^[1] tells you nothing, that two winners in seven over three years is the category's real base rate ^[13], and that the outflows are a reasonable response to it. If HIAI takes in money during its first year while trailing the S&P 500, I have that backwards.