A new report examines how artificial intelligence (AI) is viewed within the alternative investment community by General Partners (GPs) and Limited Partners (LPs).
The report, called An Inside Look at AI Trends & Future Plans with the Private Investment Community, explores two general areas – firms’ investment in AI companies/funds and firms’ integration of AI within its own workflows.
According to the survey, conducted by Dynamo Software, 75 percent of LPs plan to increase their allocation to AI investments in the next 12 months. The types of AI companies attracting the most interest from alternative investors include cybersecurity (56 percent), predictive analytics (55 percent), and data centers (54 percent). Autonomous vehicles and computer vision each garnered interest from just 14 percent of respondents.
About 72 percent of LPs plan to increase investment with these AI-driven funds either in the next six months. Further, 37 percent say that increase will be very significant.
In addition, roughly 60 percent of GPs and LPs characterize their firm’s current AI strategy as “at the beginning stages of exploration.” However, another 27 percent say they are fully engaged with the technology, while 20 percent said they have incorporated AI into some of their standard processes. Just 7 percent said they use AI extensively.
“With nearly half of investors reporting that AI has improved their portfolio performance, it’s clear that artificial intelligence is emerging as an undeniably powerful tool in transforming the investment landscape,” Hank Boughner, CEO of Dynamo, said. “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.”
The top five ways GPs are using AI today include portfolio monitoring (35 percent), portfolio valuation (32 percent), deal origination/analysis (29 percent), document management (29 percent), and security analysis (29 percent).
Nearly 40 percent of LPs are using AI for automating data extraction and collection, with another 14 percent set to start within the next six months.
Additionally, more than half of the GPs and LPs who participated in Dynamo’s survey believe AI is likely to displace jobs within the next five years. But at the moment, the GPs and LPs that participated in Dynamo’s survey largely believe AI to be only moderately disruptive to traditional investment strategies.
However, 74 percent of participants believe the technology will be at least important for maintaining a competitive advantage in alternative investing.
According to Boughner, because the field of AI is advancing rapidly, Dynamo intends to repeat the survey of AI deployment and perception annually to spot trends, consult with GP and LP clients and inform its own product roadmap.