How will AI transform alternative investments?

Hank Boughner, CEO, Dynamo Software

As fund managers, institutional investors, and service providers scale and expand across the globe, serious technological and regulatory challenges are inevitable. Firms must address these scaling issues, while at the same time determining the best execution strategy in a market that continues to grow as inflation eases and equities close in on double-digit gains.

In 2023, with surging popularity of new generative AI applications such as ChatGPT, businesses both grappled with, and also rapidly embraced, the operationalization of AI into everyday business. According to a report by US News, the global market for artificial intelligence in asset management was worth approximately $2.6 billion in 2022, but is expected to expand at a compound annual growth rate of 24.5% from 2023 to 2030.

Despite the incredible growth projections, there is also healthy skepticism of some of AI’s most sweeping claims. According to a KPMG poll, 75% of financial services business leaders currently believe AI is more hype than reality. However, that same report highlights that firms approaching AI from a customer-focused growth agenda are already beginning to see returns. According to Harvard Business Review, “44% of all working hours across industries have the potential to be impacted by generative AI.” The largest opportunity lies in banking, where 72% of working hours can potentially be transformed by generative AI. In insurance, the figure is 68%. Capital markets are not far behind at 67%.

In the alternatives investment industry, using predictive and generative AI is becoming more common. Predictive AI uses sophisticated analysis to predict specific outcomes. For example, this could be the categorization of emails into different groupings by using natural language processing to instantly scan the body, subject line, and “from” address of your emails to intelligently suggest relevant links and tags within a CRM platform. Generative AI can synthesize vast amounts of content and generate an output nearly instantly. It can, for example, take three to four years of notes and create an actionable report, or develop a detailed job description after being fed qualifying inputs, or write an appropriate introduction for your LinkedIn profile based on the information contained in your profile. 

Real-world applications in financial services are emerging rapidly. BlackRock Systematic uses transformers to maximize the accuracy and precision of natural language processing across a wide range of data sources, uncovering potentially valuable investment insights. JPMorgan Chase uses AI to analyze legal documents and extract important data points, which helps to save time and reduce errors.

Throughout the industry, AI is changing how financial institutions generate and apply insights from data. This is propelling innovative business models, and reshaping both the competitive environment and nature of the workforce, while engendering new risk dynamics and posing novel challenges to business and policymakers alike. Investment firms are increasingly using AI to improve their operations and gain a competitive edge. 

In fact, AI is leading transformation in the financial services industry by streamlining processes, unlocking insights, creating faster and contactless interactions, and improving fraud protection and cybersecurity at a pace and scale like never before. 

US-based Dynamo Software, headquartered in Watertown, MA with offices throughout North America, EMEA, APAC, and UAE, has been leveraging machine learning, a subset of AI, for many years. Through machine learning, Dynamo has automated as much of the investment process as possible for both General Partners and Limited Partners throughout its alternative investment fintech platform. For example, Dynamo automates email scans directly from Outlook and populates into its CRM module. This translates into the ability to prepopulate key information and identify if documents are already in the system or need to be uploaded. Dynamo is also able to auto-categorize documents.

Additionally, Dynamo is focused on the development of new features that impact clients or processes where it’s most impactful. To that end, the company regularly convenes to stay abreast of the latest developments in AI. Dynamo’s AI team meets weekly to discuss and analyze important trends that may impact its business and the best ways to incorporate them. The aim is to always help Dynamo clients get exactly what they need to fuel the highest degree of productivity and effectiveness. 

Dynamo’s approach to AI as a fintech company is focused on harnessing the technology in the right way to provide maximum value to our clients. There are only so many hours in a day and no one has more than another. But by using AI and process improvements to manage every resource wisely, Dynamo helps its clients gain a performance edge. 

Watch Dynamo’s on-demand webinar to learn how to gain greater growth efficiency with a single source of institutional knowledge.