Deloitte announced that AI is expected to significantly enhance the portfolio valuation process. This technology is anticipated to increase the frequency and efficiency of portfolio valuations.
As of mid-2023, fewer than 10% of private funds had adopted AI for core functions. Deloitte forecasts that over the next five to seven years, about 25% of private equity firms will incorporate AI to enhance portfolio valuations. By the end of 2023, roughly 10% of private investment firms began using AI for tasks like investment opportunity identification and due diligence. The adoption rate for AI in these areas is projected to grow at a compound annual growth rate of 30%, with an estimated 40% of firms using AI for complex tasks also applying it to portfolio valuations each year, according to Deloitte.
Recent regulatory changes are expanding private market access for retail investors. The Securities and Exchange Commission (SEC) and European Commission have updated their rules to lower barriers, while new disclosure requirements are being enforced. According to Deloitte, AI could enhance compliance by providing more frequent and accurate portfolio valuations and addressing concerns about outdated valuations.
AI could help address challenges in private capital markets by increasing the frequency of portfolio valuations, which can reduce issues related to the denominator effect and secondary market inefficiencies. This shift aims to benefit investors and regulators, though concerns about AI’s use in valuations need to be managed, according to Deloitte.
Deloitte is a global network of firms providing professional services across various sectors. With over 175 years of experience, Deloitte operates in more than 150 countries and territories, employing approximately 457,000 people. The firm focuses on delivering measurable and sustainable results for clients and communities, emphasizing its commitment to creating trust and contributing to a more equitable society. Deloitte’s services include audit, consulting, risk advisory, and tax services, supported by specialized programs and initiatives.