We examine the informativeness of fund risk disclosure by combining fund returns and textual data. We develop a novel measure, INF, to capture the explanatory power of disclosed risks for fund returns. Average INF is 55% after controlling for market risk and remains 26–29% after excluding risks related to fund name or strategy. We explain variations in INF through disclosure costs and benefits: (1) Funds with less informative disclosures face SEC comment letters and reduced flow, (2) informative disclosures attract institutional flows, and (3) performance concerns may disincentivize disclosure. Overall, funds face trade-offs between transparency and maintaining their competitive advantage.

Using a novel measure of investment companies’ reliance on generative artificial intelligence (GenAI), we document a sharp increase in GenAI usage by hedge funds after ChatGPT’s 2022 launch. A difference-in-differences test shows that hedge funds adopting GenAI earn 2-4% higher annualized abnormal returns than nonadopters, while non-hedge funds do not benefit. The outperformance originates from funds’ AI talent and ChatGPT’s strength in analyzing firm-specific information. We conduct a new survey of fund managers’ GenAI usage to provide direct validation of our measure and offer additional new insights on how managers adopt GenAI tools in their practice.