A $112 billion asset manager argues AI’s value in private equity lies in improving returns, not reducing headcounts.
Schroders Capital, with $112 billion in assets under management, contends that artificial intelligence’s primary benefit in private equity is enhancing returns rather than cutting costs. The firm’s May white paper highlights that AI can shift return distributions by identifying more high-performing investments and avoiding losses, a critical advantage in an asset class driven by outliers.
The paper, analyzing over three decades of buyout deals, found that roughly 25% of investments yield a gross IRR above 50% over four years, while 10% return nothing. Missing a single high-performer or incurring an avoidable loss can significantly impact fund performance.
Schroders Capital has integrated three proprietary AI tools into its investment process, including a GP screening tool and two AI agents, to refine manager selection and investment decisions. The firm argues that focusing on cost reduction overlooks AI’s potential to drive returns.