- 58% of fund managers surveyed expect increased generative artificial intelligence (genAI) 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 genAI research and implementation.
- 95% of fund manager respondents reported using genAI in their work, up from 86% in 2023, confirming a new era for the industry has arrived.
The Alternative Investment Management Association (AIMA) 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 genAI among alternative investment firms. A majority expect genAI 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, genAI 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 genAI 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 (those running less than $1 billion AUM), reported having no restrictions when using genAI 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 $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 genAI 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 genAI 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 in a statement: “GenAI is reshaping the operating model of alternative investment firms. AIMA’s research into how these firms use genAI 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.”