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Employing artificial intelligence (AI) across the investment lifecycle can transform how financial firms make, manage and optimize investments.
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Only 2% of private equity firms expect to realize significant AI-driven value in 2025, but 93% anticipate moderate to substantial benefits within three to five years, according to new research.
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Investment companies that embrace this potential, while also committing to responsible AI governance, are likely to see unparalleled opportunities for value creation from using this technology.
In our rapidly evolving world artificial intelligence (AI) is transforming how investments are made, managed and optimized. While its full potential will not be realized for several years, AI already shows tremendous promise in driving smarter decisions and enhancing value creation. Investors are using AI to seek out alpha and build the capability of their organizations from today in the hope of a step change in performance in the future.
Investment decision-making has always depended on data and judgment. Generative AI (GenAI) offers game-changing new ways of working by streamlining processes and uncovering opportunities that would have been missed through conventional methods of analysis.
AI’s ability to process and synthesize data at scale can transform deal sourcing by identifying hidden market trends and winning opportunities. Advanced analytics can flag emerging industries or undervalued assets long before competitors take notice, providing a critical edge. When used for due diligence, AI can enable richer insights by analyzing datasets, market and geopolitical risks, and market sentiment – offering a 360-degree view of potential investments.
Once an asset is acquired, real-time portfolio management powered by AI can help drive greater value. This agility allows investors to adjust strategies dynamically and add and preserve value at portfolio companies. The ability to leverage AI across the investment lifecycle not only improves efficiency but also ensures effectiveness of decisions that are increasingly grounded in robust and forward-looking insights.
From operational gains to strategic value creation
To shape its AI strategy and portfolio, Mubadala continually studies the various megatrends, disruptions and emerging themes that shape the global economy. A recent white paper developed with MGX, an AI and advanced technology fund, and Bain & Co, Alpha Intelligence: The Investment Fund of the Future, looked at how the world’s biggest investment companies are approaching AI. It found that current usage is still in its infancy, mostly employed to enhance human efficiency, but that the potential for AI use is quite large.
Out of 30 private equity firms surveyed, with a combined total of $3.2 trillion in assets under management, just 2% of general partners expect to realize significant AI-driven value this year, but 93% anticipate moderate to substantial benefits within three to five years. The leaders in the race for gains are already pulling ahead of the pack by building up data scientist teams. In some cases, teams were first established a decade ago, creating a digitally aware ecosystem and activating a set of ingredients critical to build an edge in investment management.
When asked where the greatest potential for AI-driven value creation lies today, investors point to improving the performance of their portfolio companies. According to the study, 18% of funds are already seeing operational use cases for AI that are delivering value in portfolio companies. Many funds are taking an active approach with portfolio companies, such as by creating interfaces for them to monitor their competition and identify add-ons to speed up the M&A process. Others are persuading portfolio companies to adopt AI for specific use cases and providing the teams, tools and training to make it happen.
Building AI-enabled investment companies
The question of how to prepare to achieve the full potential of AI has been occupying minds at the top of the world’s biggest investment companies. The key input into AI is establishing the right data strategy and infrastructure, with robust governance, provenance checking and compliance. Investment companies hold huge quantities of data and the ability to marshal it effectively gives a competitive edge.
The structure of organizations will change as a result of AI. Teams are likely to be smaller and more top heavy. The skills required by team members will evolve, with more tech and AI experts working alongside investment professionals. There is likely to be a significant evolution in how investment professionals themselves work and many funds are already training their teams to build AI fluency.
The transformative potential of AI must be matched with responsible adoption, however. Robust governance and ethical frameworks will maximise the AI opportunity to create further value and to manage the risk of unintended consequences.
Using AI as a strategic enabler
As GenAI reshapes the investment landscape, the divide between leaders and laggards will widen. Those who embrace AI’s potential, coupled with a commitment to responsible governance, will unlock unparalleled opportunities for value creation. At Mubadala, we see AI not just as a technological evolution but as an opportunity to further align purpose with profit, accelerating the building of a better and resilient future for generations to come.
The journey ahead requires bold leadership, collaboration and a relentless focus on long-term impact. This will help the financial sector to leverage AI and turn it into a competitive and differentiated advantage. With AI as a strategic enabler, the possibilities for innovation and resilience are limitless.
Link: https://www.weforum.org/stories/2025/02/ai-redefine-investment-strategy-generate-value-financial-firms/?utm_source=pocket_saves
Source: https://www.weforum.org
