By Muskan Arora
More than half of allocators are hiking
allocation to AI along with integrating it within their decision-making
process.
While technology and AI brings its own
limitations and opportunities, it rarely has a linear path or unmatchable
growth expectations.
Earlier this year, Larry Fink, CEO and
Chairman of BlackRock highlighted huge growth opportunities in AI infrastructure and
collaborating with technologists to build data centers in the US.
Fink, sharing the same sentiment as Greg Jense, co-CIO of Bridgewater, spoke about AI boosting productivity, The increase in productivity leads to lower costs of production for businesses, which aids in price reduction and cheaper goods and services, which, in turn, helps to reduce inflation.
Click Here for More Information
Investment in AI
AI-driven funds have rapidly gained interest as 72% of allocators plan to hike investments to these funds within six months, a recent survey by Dynamo Software revealed. The survey was focused on LP sentiment.
Steven Meier, who handles the $278 billion
New York City retirement system, which includes five separate funds, seeks to make investments in software, chip development, data centers and sustainable energy infrastructure.
Keeping in mind AI’s impact on energy and
environment, Meier says there are significant opportunities in debt strategies
that support the development of that critical infrastructure.
While vetting opportunities, allocators
favor cyber-security and predictive analytics sectors. However, autonomous
vehicles and computer vision were of least interest.
Many LPs actively seek a proven track
record and transparency while looking for funds using AI in decision-making,
followed by risk management.
By some estimates, Asia Pacific region will
witness the fastest growth in AI in the next decade, with North America’s
infrastructure market sizing up exponentially by 2033.
Integration of AI within workflow
When it comes to integrating AI into
regular decision making, most allocators (60%) are in the nascent stages of
exploration, while a few (27%) are fully submerged with technology, with 20%
having incorporated AI in their standard procedure and 7% using AI extensively.
However, very few allocators claim
predictive AI to be solely focused on specific markets while 6% use them for
dedicated cases.
Mark Steed, CIO of $21 billion
Arizona Public Safety Personnel Retirement System, has been studying AI
for over a decade and highlighted “using supervised and unsupervised models” to make improved investment decisions.
“The hard thing about data is if you're
investing in funds or even direct positions, and you're extracting all of the
unstructured data and trying to make it structured so you can use it but you're
also creating your own variables along the process,” said Steed, who currently
has two data scientists on his investment team.
Technology and AI have indeed made the decision-making
process easier and more efficient, however a few have noted no impact of
using AI on their performance.
If most LPs have not already started using
AI for automating data extraction and collection, they plan to start within the
next six months.
