Artificial Intelligence in Private Capital

Artificial intelligence is advancing rapidly across the private capital industry, and is already being applied to deal sourcing, due diligence, portfolio monitoring, investor reporting and the administration of firms. Some of it is adopted deliberately, as firms take on new tools; some arrives quietly, as features switched on within software a firm already uses. The opportunities are significant, but so are the risks of adopting the technology without the judgement, controls and accountability the industry and its stakeholders expect.

These documents set out principles and a template that any firm can apply and use, from an early-stage venture capital firm to a large multi-strategy house. They are deliberately proportionate: the same principles apply to every firm, but the formality with which they are implemented should reflect a firm’s size, strategies and appetite for risk. A smaller firm may need no more than one individual with clear responsibility, where a larger firm will require more structure; both can follow the same path.

Good governance is not a brake on adoption. It is what allows a firm to adopt AI with confidence, to move faster than it otherwise could, to stand behind the results, and to give investors and regulators a clear account of how it uses AI and the controls around it. As AI becomes more central to how a firm operates, it will increasingly affect its legal, regulatory and insurance obligations, including in areas such as intellectual property and the ownership of AI-generated output. Each firm should take its own advice on how these apply.

Linked below, you will find information on:

• Principles for the adoption of AI
• Data governance when adopting AI
• A use policy template for AI
• Glossary of common AI terms