PRESS RELEASE:

• 58% of fund managers surveyed expect increased Gen AI use in investment processes over the next year, up from 20% in 2023.
• 60% of institutional investors would be more likely to invest in a hedge fund that allocates a meaningful portion of its budget to Gen AI research and implementation.
• 95% of fund manager respondents reported using Gen AI in their work, up from 86% in 2023, confirming a new era for the industry has arrived.

The Alternative Investment Management Association (AIMA), the world’s largest alternative investment trade body, has published new research quantifying how alternative investment fund managers and their investors are embracing generative artificial intelligence (Gen AI).

The report ‘Charting the course: Lessons from AI leaders in alternative investments’ reveals near universal usage of Gen AI among alternative investment firms. A majority expect Gen AI to play an increasingly significant role in the front office in the near future, highlighting a technological transformation underway across all regions surveyed.

In 2023, just 20% of fund managers anticipated a greater role for Gen AI in their investment process over the subsequent year while nearly half were unsure. This year, 58% of respondents expect wider front-office integration, with just 10% foreseeing no increase.

Expanding use cases and governance gaps:

Overall, Gen AI use case innovation is widening beyond early administrative tasks into a broader range of business functions, including the front office. The largest fund manager, by AUM, are more likely to use Gen AI for a wider range of use cases than their smaller peers.

At the same time, the report highlights a persistent governance gap among smaller and larger firms. Half of the respondents at smaller fund managers (in the report described as those running less than US$1 billion AUM), reported having no restrictions when using Gen AI tools. AI leaders interviewed by AIMA flagged this as a concern, underscoring the importance of robust policies, training and secure LLM deployments.

Elsewhere, just over a quarter of all respondents have hired, or plan to hire, at least one AI specialist within the next 12 months. The profile of a firm that is hiring is most likely to be a multi-strategy manager with an AUM greater than US$1 billion.

Investor insights:

Investors, meanwhile, are also taking a closer look at how fund managers are integrating these tools, with a keen interest in the opportunities for AI-enhanced outperformance. 90% of the investors surveyed believe Gen AI would positively impact the performance of at least some fund managers' portfolios over the next three years.

At the same time, investors are also increasingly alert to associated risks. Nearly one third (29%) already include specific questions on Gen AI within their due diligence questionnaires (DDQ), with a further 29% expecting to introduce them this year. These questions focus on areas such as model oversight and explainability, IP risks, data privacy, and compliance concerns.

Tom Kehoe, Global Head of Research & Communications at AIMA, said: “Gen AI is reshaping the operating model of alternative investment firms. AIMA’s research into how these firms use Gen AI is clear. The firms that will stand out are those pairing credible investment in capabilities with clear governance and human oversight. Investors are rewarding evidence over rhetoric.”

Methodology:

The research is based on a worldwide survey of 150 fund managers, representing an estimated US$788 billion in assets under management (AUM), alongside 18 of the world’s largest institutional investors that allocate to alternative investments. These include US state pension funds, endowments, and family offices across North and South America, Europe, and Asia Pacific. Respondents reflected a wide range of investment strategies, geographies, and AUM bands. By region, the UK, US, and APAC each accounted for roughly one-third of responses.

The research builds on AIMA’s first dedicated exploration of Gen AI, ‘Getting in Pole Position: How Hedge Funds Are Leveraging Gen AI to Get Ahead’. Where relevant, the report provides time-series analysis to show how sentiment and adoption have evolved since that initial research.

Contact details:

Drew Nicol, Director, Research and Communications, AIMA

Email: [email protected]

About AIMA:

AIMA is the world’s largest membership association for alternative investment managers. Its membership has more firms, managing more assets than any other industry body, and through our 10 offices located around the world, we serve over 2,000 members in 60 different countries.

AIMA’s mission, which includes that of its private credit affiliate, the Alternative Credit Council (ACC), is to ensure that our industry of hedge funds, private market funds and digital asset funds is always best positioned for success. Success in our industry is defined by its contribution to capital formation, economic growth, and positive outcomes for investors while being able to operate efficiently within appropriate and proportionate regulatory frameworks.

AIMA’s many peer groups, events, educational sessions, publications and practical tools like its Due Diligence Questionnaires and industry sound practice guidance available exclusively to members, enable firms to actively refine their business practices, policies, and processes to secure their place in that success.