Survey: More Than Half of ALTS Investors Use AI to Predict Market Trends & Investment Outcomes

Dynamo Frontline Insight Report Snapshots AI Perceptions, Expectations for the Future and Current Use Cases for ALTS Optimization

Survey: More Than Half of ALTS Investors Use AI to Predict Market Trends & Investment Outcomes

MEDIA
Nicole Selinger
nicole@kmprcollective.com
314-805-2165

New data released today from a global Dynamo Software survey of General Partners (GPs) and Limited Partners (LPs) provides a snapshot view of AI sentiment and use in the alternative investment (ALTS) community. With more than half of respondents reporting the use of AI for predictive intelligence, the survey findings illuminate early-adopter and early-investor experience with the technology so far.

The survey report, An Inside Look at AI Trends & Future Plans with the Private Investment Community, explores two AI modalities:

1) Firms’ investment in AI companies/funds
2) Firms’ integration of AI within its own workflows

GP and LP sentiment regarding the future of AI and its impact on strategy, industry jobs and overall competitiveness is also included in the report.

Investment in AI Companies/Funds

According to the Dynamo survey, 75% 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 ALTS investors include cybersecurity (56%), predictive analytics (55%), and data centers (54%). Autonomous vehicles and computer vision came in last, each garnering interest from just 14% of respondents.

In terms of what’s most appealing about funds that use AI in decision-making, a proven track record and transparency are key factors that influence more than half (55%) of responding LPs. Next in line is risk management (47%). Interestingly, just 27% of responding LPs say they factor expertise and experience into their decisions to invest in an AI-driven fund. This is likely a reflection of the community’s recognition of AI’s newcomer status in the ALTS world.

AI-driven funds have emerged as an area of rapidly growing interest for LPs. The majority (72%) plan to increase investment with these funds either in the next six months (32%) or sooner (40%). Additionally, more than a third (37%) say that increase will be very significant.

Workflow Integration of AI

The vast majority of GPs and LPs (60%) characterize their firm’s current AI strategy as “at the beginning stages of exploration.” However, another 27% say they are fully engaged with the technology, with 20% having incorporated AI into some of their standard processes and 7% using AI extensively.

Of those using the technology to predict market trends and investment outcomes, very few have fine-tuned its application. Just 11% say predictive AI is solely focused on specific markets, and just 6% say it’s dedicated only to specific use cases.

Responses regarding AI’s effect on portfolio performance revealed early promise: nearly half (47%) reported they have experienced improvements. Nearly a third (30%) have realized no impact on performance. Notably, however, zero respondents said they’d experienced deteriorating performance due to AI.

“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," 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.”

The top five ways GPs are using AI today include portfolio monitoring (35%), portfolio valuation (32%), deal origination/analysis (29%), document management (29%), and security analysis (29%).

LPs, on the other hand, are using AI for automating data extraction and collection. Nearly 40% are already doing so, with another 14% set to start within the next six months. For some GPs, this is concerning (10% very concerned, 26% somewhat concerned) when factored into how LPs engage with GP documents. The remaining 64% had a neutral stance or were not worried.

When it comes to the ALTS talent market, 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.

The Future of AI

At the current moment, the GPs and LPs that participated in Dynamo’s survey largely believe AI to be only moderately disruptive to traditional investment strategies. At the same time, 74% of participants believe the technology will be at least important (39%) if not very (28%) or highly (7%) important for maintaining a competitive advantage in ALTS.

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. The 2024 AI survey is available for complimentary download now.

About Dynamo’s Frontline Insight Reports

Published quarterly, Dynamo’s Frontline Insight Reports contain primary research obtained through online surveys of targeted alternative investor audiences. The survey results are contextualized by Dynamo subject matter experts in formal Frontline research reports. To date, Dynamo’s research team has focused on delivering noteworthy insights related to the attitudes, predictions, and strategic plans that Limited Partners (LPs), General Partners (GPs), Hedge Funds, and Emerging Managers have on a number of alternative investment topics. To learn more about Dynamo’s research reports, visit the Resource Library or contact media@dynamosoftware.com.

About Dynamo Software, Inc.

Dynamo gives alternatives investors a Performance Edge, empowering them to efficiently scale their firm to capitalize on the growing wave of private market opportunities. With the Dynamo Alternative Investment Platform, Limited and General Partners can now run a tightly integrated firm, putting all their data to work to accelerate operations across front, middle, and back office, unleashing teams to work smarter, and allowing leaders to make better investment decisions and scale their firm. Dynamo has a global footprint with operations across North America, EMEA, APAC, and UAE. For more information, please visit DynamoSoftware.com.