AI Revolutionizes Operations for Alternative Investment Fund Managers

In a rapidly evolving financial landscape, alternative investment fund managers are increasingly directing their focus towards harnessing the potential of Artificial Intelligence (AI) to enhance their operations. According to a recent study conducted by Ocorian, a global leader in fund administration and fiduciary services, nearly half of private equity, venture capital, and real estate fund managers are placing significant emphasis on the development of AI within their sector.

AI: A Strategic Focus for Alternative Fund Managers

The research reveals that 49% of fund managers are very focused on developing AI, with an additional 49% expressing a considerable level of focus. The study underscores the growing recognition of AI’s transformative potential within the alternative investment fund sector. Only a minimal 2% of respondents showed no focus or had no view on AI development.

Furthermore, the study highlights that an overwhelming majority, 97%, believe that AI will be crucial to their company’s success over the next five years. A significant 43% are convinced that AI will play a very important role in shaping their fund’s performance.

The enthusiasm for AI is partly fueled by the success of initial projects undertaken by firms. Approximately 34% of fund managers reported strong results from AI tests, while 57% acknowledged quite strong results. Only a small percentage, 7%, found the results to be average or poor, emphasizing the positive impact that AI projects have had in the sector.

Key Applications of AI in Alternative Investment

According to the study, compliance and regulation emerge as the primary areas where AI is expected to make a significant contribution for alternative fund managers. Identifying and reviewing investments rank as the second most likely area for the application of AI, showcasing its potential in enhancing decision-making processes. Recruitment is also seen as a fertile ground for AI utilization. However, areas such as client servicing, administration, sales, and marketing were ranked as having less potential for AI adoption by a relatively low number of fund managers.

Defining Alternative Investment Fund Managers

Alternative investment fund managers (AIFMs) are professionals or entities responsible for managing and overseeing alternative investment funds. These funds encompass a wide range of non-traditional investment vehicles, including private equity, venture capital, and real estate funds. AIFMs play a crucial role in making investment decisions, implementing strategies, and ensuring regulatory compliance within the alternative investment landscape.

Budgets on the Rise for AI Integration

Looking ahead, 81% of alternative fund managers anticipate an increase in AI budgets over the next two years. A notable 18% predict a dramatic surge in budgets, indicating a growing commitment to integrating AI into their operations.

Yegor Lanovenko, Co-Head of Fund Services at Ocorian, remarked on the findings, stating, “This research shows AI is being embraced by the alternative investment funds sector with fund managers globally recognizing its potential and competitive advantages for first movers.”

Alternative investment fund managers are positioning themselves as early adopters of AI, capitalizing on its benefits across investment operations, compliance, and risk management. As AI continues to evolve globally, the alternative investment fund sector stands poised to lead the way in leveraging AI innovations for sustained growth and operational excellence.