Interact 2024: The Role of AI in Private Markets

AI was compared to an “Iron Man suit” that makes analysts and associates more powerful, during a panel discussion about the role of AI in private markets at this year’s Interact conference in New York, which was moderated by Samantha Gibson (Head of Product for Public Markets, Regulatory & Compliance, and Data Science, at S&P Global Market Intelligence). The panelists spanned a diverse group of technology firm executives, AI practice area leads, and private markets investors.

While discussing many applications of AI, the panelists highlighted a divergence between the appetites of portfolio companies and their general partners (GPs) to adopt the technology. They pointed out that while portfolio companies have been quick to embrace and publicize their use of AI as “table stakes”, GPs have been slower and more cautious in their adoption of the technology, both as a driver of efficiencies and investment insights. The audience echoed the view that we are still “in the first inning” as a private investor cohort. Unproven ROI and an inability to take AI POCs to a production use case were cited as the main reasons.                                     

While assessing the potential of AI within private markets, the team was quick to point out that the ability to centralize and normalize data is a prerequisite for success. By performing analytics and processing in real time, AI can direct unstructured data to the right context, better supporting the most modern ways to interpret data. AI makes it possible to pull more attributes out of documents. One panelist said a document that yielded 20 or 30 attributes, would show 50 to 100 distinct attributes or data points when AI is applied.

Even a function such as enterprise search, which has been around for more than 20 years, could be improved upon, a panelist said. The challenge with data that goes back farther is that the associates who worked on a particular deal may be long gone from the firm. The panelist compared AI to an “Iron Man suit” for analysts or associates, as it has tools that make them much more powerful, but it doesn’t change how they actually do things.

AI has clear workflow automation benefits in private markets. While the technology first got attention being used in chatbots, financial associates don’t actually do their work in chat; they work with tools that are available to perform transactions. Automating workflows with generative AI is being considered.

Still, the call centers of portfolio companies shouldn’t be discounted as an area to address, another panelist said. Any part of call centers or customer service that can be improved can only help a business. Using AI for call centers is a good place for a firm to “flex its muscles” before applying AI to other operations.

Operations will undoubtedly become more efficient, but AI will mostly be used to improve existing processes for a long time, said the panelist who sees it as an “Iron Man suit”. Overall, the large language models (LLMs) of generative AI will produce more complete and accurate information. For private asset portfolios, associates can respond to deals faster, with relevant information taking hours rather than days to obtain.

The speakers agreed AI will help to accelerate decision-making. As an example, one panelist noted that a complex infrastructure decision that has been delayed repeatedly may finally be addressed with the support of AI. Being able to apply AI can speed up processes, save costs and make it possible to experiment with different sources of data, they said.

Considering these aspects of AI’s role in private markets, a panelist said in six months or a year the conversation would likely turn to creating AI “agents,” while remembering that dealing with technology disruptions, in their own way, sometimes mean going back to basics.