Private Equity Is Betting Big on AI. LPs Want More Than the Hype.

Private equity firms are increasingly using artificial intelligence to automate workflows and manage fund data. But as AI spending grows, limited partners are asking what they’re actually getting in return.

For LPs, the value is less about having the latest AI tools and more about faster access to information, clearer performance data and better answers. That disconnect is growing between managers and investors, according to a new Gen II Fund Services and Harris Poll survey.

The study found that 88% of general partners believe they are ahead of competitors in digital transformation. Only 71% of LPs agree.

The gap is particularly notable as AI becomes a bigger part of private equity’s technology spending. Fifty-three percent of GPs said they prioritize AI over other technology tools and frameworks, compared with 42% of LPs. Sixteen percent of GPs went further, calling AI the "only relevant factor" in technological differentiation, versus just 3% of LPs.

The findings suggest private equity’s AI arms race may be outpacing investor expectations.

For LPs, the most important technology is often less flashy. Infrastructure sophistication was the top factor LPs associated with a technologically elite manager, cited by 62%, followed closely by LP-facing outcomes at 61%. AI adoption ranked well behind those factors at 41%.

That means a firm’s competitive advantage may come down to something as mundane as how quickly an investor can get a customized portfolio report.

Nearly nine in 10 LPs already receive reporting at or faster than ILPA guidelines, yet 30% remain frustrated with reporting speed. Faster response times ranked among the top three technology priorities for 45% of LPs.

Customization is another major pressure point. Ninety-five percent of respondents agreed that GPs need to offer more customizable reporting, while a quarter of LPs said they were frustrated with obtaining the reports they need.

AI-powered tools are also gaining ground. Sixty percent of respondents viewed using AI to access internal fund information as cutting-edge, while 52% said the same about integrating large language models into workflows.

But as those capabilities become more common, today’s differentiators could quickly become tomorrow’s baseline.

For private equity firms, that could make the next phase of the AI race less about who has the most sophisticated model and more about who can prove that technology is improving the investor experience.

And in a fundraising environment where LPs are scrutinizing managers more closely, that distinction could ultimately determine which firms win the next dollar of institutional capital.

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