Alts Investors Rapidly Adopting AI — Evening Brief – 11.11.24
More than 50% of Limited Partners (LPs) investing in alternative assets are employing artificial intelligence (AI) technology to forecast market trends and investment outcomes, according to research from alternative assets-focused software vendor Dynamo Software.
Only 17% of limited partner respondents to Dynamo’s Frontline Insight Report survey indicated a preference for traditional, non-AI methodologies in strategy formulation, while 55% have already integrated AI to some extent, and an additional 28% are investigating ways to adopt the technology.
Nearly half of respondents indicated enhancements in performance due to AI, while 30% reported no effect and 23% have not yet integrated AI into their strategies.
Dynamo reported that 75% of LPs intend to augment their investment in AI dealmaking during the next 12 months. Alternative investors are especially interested in AI businesses specializing in cybersecurity (56%), predictive analytics (55%), and data centers (54%). Autonomous vehicles and computer vision ranked lowest, attracting interest from only 14% of respondents.
AI-driven funds have been a fast-expanding interest for LPs. Over 70% want to increase investment using these funds either within the next six months (32%) or sooner (40%), according to the survey, with over a third indicating that the increase will be “very significant.”
Regarding the attributes that LPs found most attractive in funds utilizing AI for decision-making, 55% highlighted a demonstrated track record and transparency, followed by risk management at 47%.
The five most popular applications of AI by General Partners (GPs) currently encompass portfolio monitoring (35%), portfolio valuation (32%), deal origination/analysis (29%), document management (29%), and security analysis (29%).
“Artificial intelligence is emerging as an undeniably powerful tool in transforming the investment landscape,” said Hank Boughner, CEO of Dynamo. “Though we’re only just beginning to scratch the surface of how these changes will unfold in the industry, there seems to be an openness by many to use AI to optimize their investment strategies.”