Digital Transformation in the Hedge Fund and Private Equity Industry

Abstract

The digital transformation is disrupting the financial sector. Venture capital, private equity and hedge funds are also affected. We see more and more firms implement emerging technologies in their investment process. There are several common trends. Big Data analytics and the use of artificial intelligence in the initial stages of the investment process significantly reduce the information asymmetries and even offer more accurate predictions of the probability of success than human analysts. At the same time, emerging technologies help democratize investment decisions. Consider the ability of emerging technologies to close the expertise gap and create a level playing field for all types of investors. Moreover, technology has the potential to make the hedge fund, private equity, and venture capital industries accessible to retail investors. Crypto markets emerged only recently, but their instantaneous success highlights the demand for alternative investment assets and opportunities across different investor groups.

Keywords: artificial intelligence, big data, blockchain, crypto, hedge funds, investors, limited partnership, private equity, smart contracts, venture capital.

JEL Classification: D22, G20, G24, G30, G41, K22, L26, O16