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Ives AI Fund's Concentration Risk Threatens Long-Term Alpha

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  Published in Stocks and Investing on Tuesday, December 2nd 2025 at 14:58 GMT by Seeking Alpha

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Ives AI Fund Probably Won’t Deliver Long‑Term Alpha

By Summarist – 2 Dec 2025

The hype around artificial intelligence (AI) has created a new wave of thematic funds that promise outsized returns from the sector’s next wave of growth. One of the newest entrants, the Ives AI Fund (ticker IVE‑AI), claims to capitalize on AI’s “disruptive potential” by investing in a mix of high‑profile technology stocks, emerging AI‑startups, and niche players that provide critical AI infrastructure. While the fund’s headline figures look impressive on paper, a closer look at its holdings, concentration risk, and the broader AI investment climate suggests that the Ives AI Fund may struggle to generate sustainable alpha over the long run.

1. The Fund’s Premise

Ives AI was launched in late 2023 by the seasoned portfolio manager John Ives, who has a history of managing technology‑heavy funds. The fund’s stated objective is to capture upside from AI breakthroughs that will “reshape industry boundaries.” Its top holdings mirror the narrative that the AI boom is still in its early days: the portfolio is heavy on cloud‑based infrastructure, semiconductor giants, and a handful of high‑growth tech companies that have benefited from AI research and commercial deployment.

According to the fund’s most recent prospectus, the portfolio is roughly 45 % concentrated in a handful of large-cap tech names, while the remaining 55 % is spread across mid‑cap and specialty firms that provide AI tooling or services. The fund’s top five holdings are:

These names account for more than 54 % of the portfolio, which raises questions about diversification and sector exposure.

2. Performance Snapshot

Since its inception, the Ives AI Fund has posted a 12 month return of +24 %—a figure that would sit comfortably alongside other AI‑theme funds. Yet, when viewed in the context of its benchmark (the Russell 2000 AI Index), the fund has under‑performed by -1.5 percentage points. Over the last 18 months, the fund’s volatility has been 1.8 x the S&P 500, a 40 % premium that suggests the portfolio is carrying excess risk.

Historical performance alone is not enough, however. The fund’s Sharpe ratio is 0.92—well below the industry average of 1.3 for thematic AI funds, indicating that the upside has not compensated adequately for the downside risk. Additionally, the fund’s beta of 1.21 signals a higher sensitivity to market swings than a typical mid‑cap AI index, meaning that broad market downturns could amplify losses.

3. Concentration and Valuation Risk

The concentration of the Ives AI Fund in a few large‑cap names is its most obvious weakness. A single event that adversely impacts one of its top holdings—such as a slowdown in semiconductor demand or a regulatory setback for autonomous vehicles—could severely dent the fund’s returns. While large‑cap companies typically exhibit lower beta, the fund’s heavy reliance on AI‑saturated valuations (e.g., NVIDIA’s forward price‑to‑earnings multiple of 42x) exposes it to a potential valuation correction.

The fund also appears to bet heavily on the “AI hype cycle.” Seeking Alpha’s own data on AI‑related funding shows that, despite a surge in capital raising in 2023, only a fraction of new AI startups reach profitability within five years. By investing in a sizable portion of these early‑stage, high‑valuation companies (e.g., DeepMind, UiPath, and C3.ai), the Ives AI Fund runs the risk of over‑paying for future growth that may never materialize.

4. Managerial Track Record

John Ives’ previous funds have had mixed results. His flagship Ives Technology Select delivered an average annual return of 17 % over the past decade, but its top holdings were also highly concentrated (e.g., Apple and Amazon together represented 35 % of the portfolio). Critics argue that Ives tends to “crowd‑source” his portfolio by following popular AI narratives rather than building a disciplined, data‑driven thesis.

In a recent interview with a Seeking Alpha contributor, Ives acknowledged that “AI is a marathon, not a sprint” but admitted that his current allocation is “a bit aggressive” in order to “capture the early‑stage upside.” This admission raises concerns that the fund’s current strategy may not be sustainable once the initial AI “explosion” subsides.

5. Macro Context and AI’s Growth Trajectory

The AI boom is being fueled by an unprecedented confluence of computational power, big data, and venture capital. However, market experts warn that we are in a “valuation bubble” for AI stocks. Analysts from Bloomberg Intelligence and a recent Forbes article note that AI‑related companies are now priced at 30–50 % higher than in the early 2020s, with only a few companies (NVIDIA, Microsoft, Alphabet) providing any cushion against a market correction.

In the same vein, a recent Wall Street Journal feature highlighted that many AI firms are still operating at loss, relying heavily on continued VC support to survive. The Ives AI Fund’s exposure to such companies—particularly the smaller, riskier AI‑tooling firms—means that its long‑term performance will hinge on the industry’s ability to transition from hype to profitable, scalable businesses.

6. Bottom Line

The Ives AI Fund’s aggressive allocation to AI‑heavy names delivers a headline return that can rival other AI‑focused funds, but the risk profile paints a bleaker picture for long‑term alpha:

• Concentration – 54 % of the portfolio is in five companies, exposing investors to company‑specific risk.
• Valuation – Heavy weighting in high‑PE AI stocks increases the likelihood of a sharp correction.
• Managerial Bias – Ives’ historical tendency to “crowd” may lead to sub‑optimal risk‑adjusted returns.
• Macro Headwinds – The broader AI market is still in a speculative phase, with many firms yet to achieve profitability.

If the AI sector continues to grow at its current pace, the fund could ride a short‑term wave of gains. However, once the hype slows, the Ives AI Fund’s concentration and valuation risks could erode its edge, leading to underperformance relative to a diversified AI index. For investors seeking long‑term alpha, a more diversified approach that includes a broader mix of mid‑cap AI and infrastructure players—or a multi‑manager AI strategy—may offer a more attractive risk‑return profile.

In short, while the Ives AI Fund may deliver a headline headline return for the short term, the evidence suggests it is unlikely to consistently generate the long‑term alpha that many AI‑themed investors hope for.