Defining use cases and relevant vendors for the fast-moving area of AI and GenAI in Private Capital represents a significant challenge. While we do have criteria in place to determine positioning on the map, any omissions are likely unintentional and we encourage you to contact info@pestack.com and erica.shery@hollandmountain.com in order to request any changes or additions to the map.
AI and GenAI in Private Equity - Key Considerations
AI, and GenAI in particular, is the most common topic we encounter when speaking with our clients about ongoing technology and operational strategy. As pressure grows on private capital firms to do ‘something’, the potential for bad decision-making grows. Specifically – we see
Risk in building technology which already exists
Adopting technology today which may limit options in future
Working with generalist AI developers that do not understand private capital
Failing to implement appropriate AI policies and training
Adopting industry solutions where more generic applications may be better suited (and vice versa)
That said, there are proven technologies and vendors in the space and it is important for private equity firms to act now – put a policy in place, train employees and adopt appropriate technology as part of a robust strategy and roadmap (all things we can help with, please contact info@hollandmountain.com to learn more).
Holland Mountain’s PE Stack has created this AI industry map to show that many AI use cases are available to the Private Capital industry.
We aim to include all vendors that use AI tools in their software solutions. More private capital vendors will be added to this map through ongoing research. We have identified over 100 AI vendors that apply generative AI and machine learning in their software solutions.
While PE Stack typically avoids covering more generic solutions within its analysis and market mapping, we are intentionally including some of the key business-focused AI vendors and solutions which we are seeing our clients successfully adopt such as Copilot and ChatGPT.
Deal Sourcing
Deal sourcing relies heavily on manual searches, personal networks, and in-depth market knowledge to identify potential investment opportunities. AI tools can help identify possible investment opportunities by analysing vast amounts of data from various sources, such as financial news, social media, company websites, and existing 3rd party databases. Intelligent tools can provide recommendations to origination teams and help them learn from the outcomes to improve over time.
Investor Relations/Experience
Traditionally, managing investor relations involves significant manual effort in tracking communications, updating CRM systems, and personalising interactions. AI tools provide real-time updates and relationship intelligence, allowing firms to manage investor communications and maintain up-to-date profiles efficiently. AI can analyse investor queries and provide suggested responses with references to supporting material to which it has access. Investor communication styles can be profiled, enabling personalised communication and recommendations. The strength of relationships with individuals can be analysed using multiple sources of information. Evaluation of investor engagement with materials is also a useful information point.
Portfolio Monitoring and Unstructured Data Extraction
Traditional portfolio monitoring requires extensive manual effort to track performance and manage risks. Utilisation of generative AI tools can be used to visualise data and reduce manual work. This can be useful for portfolio monitoring or responding to ad-hoc client requests. Complementing this, tools can extract meta and document data from capital account statements, investment schedules, notices and investor reports. Given that a high volume of data in private markets is unstructured, this can deliver significant efficiency through creating a structured data set that can be processed and analysed.
Compliance and DDQ Support
Responding to DDQs and ensuring compliance with regulatory requirements involves extensive manual processes, often leading to delays and inconsistencies. AI technologies automate the completion of due diligence questionnaires through previously completed answers. Natural language models use semantic search to find answers to similar questions. These tools enable Private Market firms to swiftly complete these questionnaires.
Legal Review
Extracting and analysing legal terms from documents requires significant manual effort and is prone to errors. AI-driven tools accelerate the review and negotiation of legal documents through automated routines. Key legal terms can be extracted using natural language search and build a central repository of legal obligations. This technology streamlines legal compliance and reduces the time spent on document review, ensuring that firms can manage legal risks more effectively and efficiently.
Virtual Assistants and Agents
Office environments often rely on human staff to handle routine administrative tasks, which are time-consuming and prone to errors. Virtual assistants and agents powered by AI have transformed this by automating various tasks, such as scheduling meetings and managing emails. By integrating AI-driven virtual assistants and agents, firms can streamline operations, reduce operational costs, and enhance overall service quality, ultimately contributing to improved business performance.
Conclusions
Integrating AI across Private Equity, Private Debt, Real Estate, and Infrastructure offers significant benefits, including enhanced efficiency and improved decision-making. By adopting AI solutions in deal sourcing, portfolio monitoring, compliance, and more, private capital firms can stay competitive and ensure sustained success.
Navigating the evolving AI landscape can be challenging. With the technology evolving rapidly and AI-associated risks, it is essential to partner with the right software vendor that best services your specific needs.
For more information on AI providers, applications and AI readiness, please get in touch with us. We’d love to share our market insights and help you select the best AI tool for your needs.