The role of AI in private equity is only growing, and this updated list reflects the latest trends and innovations in the industry. We will continue to update it as new developments emerge.
Here are 10 AI use cases that your private equity peers are diving into.
Deal Sourcing
AI can help identify potential investment opportunities by analyzing vast amounts of data from various sources, such as financial news, company websites, and existing third-party data sources. Origination teams can then benefit from the recommendations this generates, with AI tools learning from the outcomes to improve over time. Risk assessments can be automated as well, with AI identifying potential risks through stress testing and scenario evaluation.
Document Creation
One of the most widely used features is the automation of material creation, such as pitch decks. The focus currently is on text generation, as AI financial analysis and slide generation can be generic. However, differentiation remains important.
CRM Management
AI tools can be used alongside and integrated into existing CRM systems to automate data entry and pull reports, helping to reduce repetitive manual tasks and resultant user errors. Generative AI can also be utilized to interrogate a CRM system to query out-of-place data.
Extract Unstructured Data
AI can automatically extract key information from various documents, such as capital account statements, investment schedules, and investor reports. Given the high volume of unstructured data in private markets, this can deliver significant efficiency by creating a structured data set that can be processed and analyzed.
Generative Analytics
The utilization of generative AI tools can be used to visualize data and produce insights, reducing manual work. For a GP, this can be a useful operational tool for helping to respond to ad hoc investor requests and portfolio monitoring more broadly.
Relationship Intelligence
AI can support and enhance LP servicing by analyzing and suggesting responses to investor queries, directly referencing any materials to which it has access. Investor communication styles can be profiled, enabling personalized communication and recommendations. AI can then analyze a relationship strength based on multiple information sources.
DDQ Automation
Automate the completion of due diligence questionnaires (DDQs) through previously completed answers. Natural language models use semantic search to find answers to similar questions and generate responses tailored to the relevant question.
Legal Reviews
AI can help to accelerate the review and negotiation of legal documents, through automated routines. Key legal terms can be extracted using natural language search. It is also important to build a central repository of legal obligations.
Data Room Summary
AI is also used in the investment due diligence process. By retrieving and summarising information from data rooms, time and effort efficiencies are gained by reducing manual checks. However, thorough human oversight and testing are initially required and should be upheld to ensure information is complete and accurate.
Sentiment Analysis
AI sentiment analysis tools can gauge public sentiments by ingesting textual data, such as news articles and social media. This can be applied at the investment level to spot hidden signals that are not visible solely through numerical analysis. This provides real-time insights to investors, empowering decision-makers to identify market opportunities and cover potential risks. It can also be used to monitor investor satisfaction, helping to improve the LP experience.
How to get started with AI?
The AI technology landscape for Private Equity is only growing, with 300+ tools listed in our latest research.
While private equity professionals can benefit from these use cases, firms must explore the risks and opportunities associated with them to best select their technology partner in alignment with their AI strategy.
Having helped 150 Private Equity and Private Credit managers with their operational needs, Holland Mountain’s team of AI specialists for private capital can help you along your AI journey. Contact us to get started.
