Fearless of the AI bubble! Robinhood CEO: Plans to launch a new fund to allow retail investors to invest in OpenAI and others

American brokerage Robinhood plans to launch a new fund that allows retail investors to invest in privately-held AI companies with skyrocketing valuations. This move signifies that the asset management industry is viewing retail investors as a new source of capital for the private market, but concerns have been raised about the fund's structure and the company's lack of management experience.

On November 10th, it was reported that Robinhood CEO Vlad Tenev stated that rather than worrying about whether there is a bubble in the AI industry, he is more focused on giving "ordinary people" the opportunity to participate in the rapid growth of private AI companies. He mentioned that AI will create "massive disruption, and we want people to have access to the driving force behind that disruption."

The plan will be managed by Robinhood's subsidiary Robinhood Ventures, which will oversee a tradable fund that invests in a highly concentrated portfolio of five or more "best-in-class" private companies, potentially enhancing returns through borrowing.

This initiative comes as asset management firms seek to tap small investors as a new pool of capital for private markets. In the past 12 months, just 10 loss-making AI companies have increased their valuations by nearly $1 trillion through private transactions, including top AI developers like OpenAI and Anthropic.

However, reports also indicate that this design has prompted data firm Morningstar to warn that "managing such a complex private equity strategy could severely harm its rapidly moving user base."

Targeting the Private Market: Retail Investors as a New Capital Pool for Asset Management

Robinhood's move comes at a time when asset management firms are competing to attract retail investors as a new source of capital for the private market. An executive order signed by President Trump last August lowered the barriers for employers to include assets like private equity and private credit in retirement plans, paving the way for this trend.

Asset management giants including Blue Owl, Blackstone, and Apollo are expanding their target clientele from institutional investors to individual investors. This shift is occurring against the backdrop of a continuous shrinkage of the U.S. public markets over the past few decades.

According to PitchBook data, the number of private companies in the U.S. valued at over $1 billion has surged from 20 in 2016 to over 1,000 in 2024.

In the AI sector, top developers have led the surge in startup valuations. Just 10 loss-making AI companies have increased their valuations by nearly $1 trillion through private transactions in the past 12 months, with companies like OpenAI and Anthropic representing this wave of enthusiasm.

Closed-End Structure Raises Risk Concerns

Reports indicate that Robinhood's planned fund will adopt a closed-end structure, which means that investors cannot quickly redeem shares at any time, and if too many investors seek to exit simultaneously, the funds may become trapped.

This design, combined with the company's relatively limited experience in fund management, has raised market concerns about the protection of retail investors. Bryan Armour, Director of Passive Strategy Research at Morningstar, warned that:

"Managing such a complex private equity strategy could severely harm its rapidly mobile user base."

Despite the risks, Tenev stated that retail customers, known for buying during stock market downturns, are eagerly seeking such opportunities, even though the investments may face significant risks of going to zero.

He also refuted concerns that the AI boom is a bubble, stating that Robinhood customers are "massively buying" AI themes. "I don't think (the price-to-earnings ratios of large tech companies) are severely misaligned," said the CEO, who became one of the representatives of the meme stock craze in 2021 due to Robinhood's popularity among adventurous retail investors