ALPHA
INTELLIGENCE

THE INVESTMENT FUND OF THE FUTURE

ARTIFICIAL INTELLIGENCE IS USHERING IN 
THE MOST PROFOUND TECHNOLOGICAL 
TRANSFORMATION OF OUR LIFETIMES, 
RESHAPING HOW INVESTMENT FIRMS OPERATE 
AND DRIVE ALPHA.

FUTURE OF INVESTING

The meteoric rise of artificial intelligence (AI) is creating a wave of excitement over its potential to transform workflows, economies and society.

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This transformation will be unprecedented in scale, pace and impact. That is the promise. But in common with all major technological leaps, a degree of skepticism is creeping in as change proves to be hard and progress lags hype. This white paper aims to provide an overview of how investors are using AI to drive alpha today and where the technology might take them next. It is based on an extensive review of AI adoption across the industry and detailed case studies of global investment funds at different stages of AI integration.

Current usage is still at the ‘augmentation’ stage, with both funds and portfolio companies mainly using AI to enhance efficiency as opposed to achieving a step change in growth. Within the next three to five years, however, funds’ data-science teams foresee the technology delivering groundbreaking applications across the investment lifecycle and for portfolio companies. The ability of funds to identify, capture and create value with AI means that competition for high-quality deals will intensify.

Early adopters that reorient their organizations to thrive in an AI-native environment will be at an advantage in this heightened competitive landscape, despite the near-term uncertainties around the cost and impact of investing in AI. Within the global investment fund industry a few investors have begun to pull away from the pack. These frontrunners have clear AI strategies and are building capabilities and processes at both the operational and portfolio company level. This activity is not going unnoticed by Limited Partners, who display a distinct preference for backing General Partners that use AI.

Mubadala has been investing in disruptive technologies for decades. Today, its investments span foundational models, infrastructure and applications. MGX, which was established more recently, is adopting a comprehensive ecosystem approach to AI, with a focus on investing in AI infrastructure, semiconductors and foundational AI technologies and applications. Accordingly, both organizations are dedicated to embedding AI in their operations, which is being carried out on the back of a multi-year commitment to investments in data, people and tools to drive AI-centricity and internal transformation. AI transformations are complex and require the long-term commitment of top executives anchored in a well-defined AI adoption strategy.

A successful transformation rests on three pillars: a) robust data strategy and infrastructure; b) transforming the organization, operating model and talent; and c) change management focused on an AI-first culture and tool adoption. In the face of rapid changes and big challenges, investors should adopt an agile approach focusing on a few high-value use cases to test. Lastly, AI transformations will create new alliances. AI investors will need to strategically partner with a broader ecosystem including regulators, innovator start-ups and academia to successfully drive and adopt innovation.

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INSIGHTS FROM
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