Can AI augment private market investing?

Can AI augment private market investing?
In the ever-evolving landscape of private markets, the integration of advanced AI-based data collection and analysis promises to be a game-changer, say Titanbay.

While the essence of private market investment thrives on human relationships and astute judgement, the potential of AI to revolutionise its processes, augment decision-making, and optimise costs cannot be overstated. This transformative technology holds the key to unlocking new efficiencies and opportunities within the private market sphere and its application to investment screening, due diligence and portfolio management will have a far-reaching impact on the industry.

AI applications in private markets
Like most industries, private markets stand to gain materially from advanced AI. It has the potential to build efficiencies into processes, enhance decision-making both pre and post-investment and reduce costs. Key applications for private markets include:

Investment screening and analysis – AI tools can efficiently collect and screen vast amounts of data, allowing investors to quickly identify suitable investment opportunities, analyse industries and compare companies.

Due diligence – using AI, managers can efficiently capture and analyse data from financial statements, legal documents and publicly available information on targeted investment opportunities. Deal teams will be able to move with greater speed and accuracy, avoiding manual data capture.

Portfolio monitoring – managers can leverage broader data sources to analyse portfolio companies, industry trends and identify risks.

Exit strategies – AI can support managers to optimise exit strategies, by identifying market trends and forecasting financial performance to predict optimal exit timings.

Secondary transaction pricing – secondary transactions often involve portfolios with multiple underlying funds and portfolio companies. AI can potentially analyse underlying financials in combination with broader market pricing, and provide live, continuous pricing estimates for private market portfolios. 

For many years, innovative private equity managers have explored technology solutions to gain a competitive edge. One of the earliest and best-known examples of AI and machine learning tools in private equity is EQT’s Motherbrain. It captures hundreds of millions of data points used for market analysis and monitoring, expert talent sourcing, and company benchmarking.

More recently, there have been reports of managers testing generative AI tools like ChatGPT, while some general partners (GPs) have hosted hackathon events to build new AI tools. Others have suggested implementing an AI bot with a seat on the investment committee to enhance investment decision-making and reduce biases. Although many of these ideas are still nascent, we expect AI advancement to have a material impact on the private market landscape.


In summary
Successful investments will always rely on strong relationships and human judgement. There is no doubt, however, that AI offers a multitude of opportunities to build efficiencies, improve decision-making processes and reduce operating costs. While still in its infancy, AI’s trajectory is clear, and the impact of advanced AI-based data collection and analysis on the future of private markets promises to be both transformational and exciting.


Important disclosures
This material has been prepared by Titanbay Ltd and its affiliates (together, “Titanbay”) for informational purposes only, for sophisticated and eligible investors only. It is not and may not be relied on in any manner as legal, tax or investment advice, any recommendation or opinion regarding the appropriateness or suitability of any investment strategy, or as an offer to sell or a solicitation of an offer to buy any financial instrument. Titanbay does not provide investment advice or make recommendations.

All information and any statements presented herein are considered to be accurate at the time of production unless otherwise stated and have been prepared from sources we believe to be reliable. No representation or warranty or guarantee, expressed or implied, is given as to the truth, accuracy or completeness of the information or opinions contained herein. No reliance may be placed for any purposes on the information or opinions contained in this communication and material aspects of descriptions contained in the communication and supporting materials are subject to change without notice. Non-affiliated entities mentioned are for informational purposes only and should not be construed as an endorsement by or sponsorship of Titanbay.

Any forecasts, figures, investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. Any views, opinions and estimates expressed herein constitute personal judgments of the contributor, are based on current market conditions and are subject to change without notice. This communication in no way constitutes Titanbay research and should not be treated as such.

Investment in private placements, and private equity via feeder funds in particular are complex, highly illiquid, and speculative in nature and involve a high degree of risk. The value of an investment may go down as well as up, and investors may not get back their money originally invested. Investors who cannot afford to lose their entire investment should not invest. Past performance is not indicative of future performance. There can be no assurance that any current or future investments will achieve results comparable to historic results or that any investment objectives or return targets will be met. For private equity investments via feeder funds, investors will typically receive illiquid and/or restricted membership interests that may be subject to holding period requirements and/or liquidity concerns. Investments in private equity are highly illiquid and those investors who cannot hold an investment for the long term (at least 10 years) should not invest. Please refer to the Confidential Offering Memorandum of the Titanbay Master Fund SCSp-RAIF before making any investment decisions.

Titanbay Ltd is an Appointed Representative of Brooklands Fund Management Limited which is authorised and regulated by the Financial Conduct Authority with firm reference number 757575. Copyright Titanbay 2023.

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