Don’t be left behind as AI hits Private Markets

The next wave of value creation in private markets will be powered by artificial intelligence — not as a replacement for human judgment, but as a catalyst for better, faster decision-making. 

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These technologies are transforming everything from deal sourcing to portfolio management — and even the makers of AI solutions are forced to regularly reassess what is possible. 

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Private equity firms are sitting on record levels of dry powder, yet face increasing pressure to deploy capital wisely in an uncertain economic climate. Meanwhile, family offices and wealth managers are allocating more to private markets, creating additional complexity in deal flow, due diligence and reporting. The difficulty of managing this confluence of factors makes AI adoption not just advantageous, but increasingly essential.

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The most immediate impact is in accelerating time-consuming processes that traditionally created bottlenecks. The average due diligence timeline has expanded to 203 days compared to 123 days a decade ago. With AI, you can now shrink that from months down to weeks, and can complete initial due diligence questionnaires in a day. How? AI analyses thousands of documents across multiple data rooms simultaneously, flagging key risks and opportunities that merit human attention. 

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This gives private equity firms a way to deal seamlessly with global transactions, by using either AI software directly or purchasing managed services solutions powered by AI, to ensure round-the-clock coverage. 

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For family offices, the enhanced efficiency of AI is democratising access to deals that were previously difficult to evaluate with limited resources. 

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But the real transformation isn't just about speed — it's about depth of insight. Machine learning algorithms can identify patterns across vast datasets that humans simply can’t process. This is especially valuable in areas like deal sourcing, where AI can screen thousands of companies against investment criteria, highlighting opportunities that might otherwise be missed. For wealth managers advising on private market allocations, this technology enables more sophisticated portfolio construction and risk assessment.

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However, it’s important to be clear-eyed about the challenges. Data quality remains a significant hurdle: AI is only as good as the information it processes, and private markets have historically suffered from inconsistent and unstructured data. 

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There are now breakthroughs when it comes to unstructured data: Robin, for example, offers a feature that will let you pull out information such as dates and percentages buried inside contract texts, and structure it so that it can be compared in useful ways across all your documents.

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Security concerns are also valid, particularly given the sensitive nature of deal information — putting a premium on trusted partners such as AI foundation model providers and cloud providers. 

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Generational cultural challenges may also exist: many successful investors built their careers on relationship-building and intuition, making them naturally skeptical of technological solutions.

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The key to overcoming these obstacles lies in taking a measured approach. Rather than attempting wholesale transformation, successful firms are starting with specific use cases where AI demonstrates clear value - such as automating routine contract review or streamlining investor reporting. This creates quick wins that build confidence.

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It's also crucial to maintain a "human-in-the-loop" approach. The most effective implementations combine AI's processing power with human judgment and experience. For instance, while AI can rapidly analyse historical deal data to identify success factors, it's still human investors who must evaluate whether these patterns will hold in current market conditions.

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Looking ahead, I believe we're approaching a tipping point where AI adoption will become a key differentiator in private markets. Those who master the integration of technology while preserving their human edge will gain significant advantages in both deal execution and value creation. 

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The stakes are particularly high for family offices and wealth managers, who must compete with larger institutions while maintaining lean operations. AI helps to level this playing field, providing sophisticated capabilities without requiring massive infrastructure investments.

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The message to the industry is clear: AI in private markets isn't about replacing human expertise — it's about amplifying it. 

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The future of private markets will belong to those who can successfully blend technological capability with traditional investment acumen. 

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In this environment, it's not the biggest players who will necessarily win, but rather those who can most effectively harness AI to enhance their natural strengths. Those who are afraid to test the waters will find themselves left behind.

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A version of this article first appeared in the Financial Times' Private Wealth Management.