Private Equity

The private equity (PE) industry is constantly changing as a result of bear and bull markets, government legislation, business trends, globalization, and many other factors. Another major trend is the increasing specialization of firms. “The proliferation of sector-focused funds continues and we don’t expect that to change,” says Andrea Auerbach, global head of private investments at Cambridge Associates and co-author of the Declaring a Major report. “Our data shows firms with sector specialization have a competitive advantage.” A second trend is the increasing use of data analytics, artificial intelligence, and blockchain technology (which can be defined as a distributed ledger database that maintain a continuously-growing list of financial records that cannot be altered) to improve efficiency, better ensure the accuracy of data, and solve other problems both in-house and at portfolio companies. These aforementioned technologies—along with cryptocurrencies, nonfungible tokens, the metaverse, and other technologies are sometimes referred to as Web 3.0.) More than 50 percent of senior executives from U.S. PE firms with at least $2 billion assets under management surveyed by S&P Global Market Intelligence in 2022 reported that they leveraged machine learning (60 percent) or general artificial intelligence (57 percent) in investment processes, either through third-party products or in-house efforts. “Increasingly, firms are using data, artificial intelligence, machine learning and automation to find companies, conduct due diligence, underwrite risk more comfortably, and do it faster,” according to Bain & Company. “Firms that aren’t moving in this direction risk being left behind.”