In the ever-evolving landscape of private markets, the integration of advanced AI-based data collection and analysis promises to be a game-changer.
While the essence of private market investment thrives on human relationships and astute judgement, the potential of AI to revolutionise its processes, augment decision-making, and optimise costs cannot be overstated. This transformative technology holds the key to unlocking new efficiencies and opportunities within the private market sphere and its application to investment screening, due diligence and portfolio management will have a far-reaching impact on the industry.
"...private markets stand to gain materially from advanced AI."
AI applications in private markets
Like most industries, private markets stand to gain materially from advanced AI. It has the potential to build efficiencies into processes, enhance decision-making both pre and post-investment and reduce costs. Key applications for private markets include:
For many years, innovative private equity managers have explored technology solutions to gain a competitive edge. One of the earliest and best-known examples of AI and machine learning tools in private equity is EQT’s Motherbrain. It captures hundreds of millions of data points used for market analysis and monitoring, expert talent sourcing, and company benchmarking.
More recently, there have been reports of managers testing generative AI tools like ChatGPT, while some general partners (GPs) have hosted hackathon events to build new AI tools. Others have suggested implementing an AI bot with a seat on the investment committee to enhance investment decision-making and reduce biases. Although many of these ideas are still nascent, we expect AI advancement to have a material impact on the private market landscape.
Successful investments will always rely on strong relationships and human judgement. There is no doubt, however, that AI offers a multitude of opportunities to build efficiencies, improve decision-making processes and reduce operating costs. While still in its infancy, AI’s trajectory is clear, and the impact of advanced AI-based data collection and analysis on the future of private markets promises to be both transformational and exciting.
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