AI integration accelerates in private equity as firms adapt to investor demands for digitisation

Innovation took centre stage on Thursday as the Luxembourg Times launched the Spring edition of its magazine at Neimënster in Luxembourg City.

Attended by around 150 people, the event featured discussions on emerging technologies, as well as the importance of supporting innovative new companies, improving their access to capital and adapting to digitisation.

Luís Galveias, Chief Operating Officer of the Luxembourg Private Equity and Venture Capital Association (LPEA), opened the evening, highlighting that innovation lies at the heart of the private equity and venture capital industries. “If there is anything that is constant in PE and VC, it is change. It is innovation,” Galveias said.

He added that Luxembourg’s private equity sector has expanded rapidly in recent years and now manages around €1.4 trillion in assets – representing 20% of the country’s financial centre.

The industry is vital in supporting young, innovative companies and helping Europe regain its competitive edge, said Luxinnovation CEO Mario Grotz. Appearing on the cover of the Spring edition of the magazine, Grotz spoke in a “fireside chat” with Luxembourg Times editor-in-chief Cordula Schnuer.

“In Europe, this isn’t always easy. The situation has improved in recent years, but there are still challenges – particularly when it comes to late-stage funding,” Grotz said.

Grotz added that there is a need to bridge the gap that currently exists between available funding and startups. “Perhaps the industry in Luxembourg can also look to nearby regions to tap into a larger pool of startups,” he said.

A panel discussion, moderated by Luxembourg Times journalist Aaron Grunwald, explored the role of technology – particularly artificial intelligence – in shaping the future of private equity and venture capital.

While the speed at which rapidly evolving technologies like AI are integrated may depend on a firm’s size and specific needs, the need to evolve is undeniable, said Maren Stadler-Tjan, Partner in Investment Funds at Clifford Chance.

Investment management companies are already feeling the pressure from clients to digitise quickly. “In the past, the way we raised funds was from the stone ages. Now, we have to be digital,” said Diana Meyel, Managing Partner at Cipio Partners. “Investors have many options, so you can’t expect them to go through lengthy processes – it has to be quick and digital.”

Asset managers, too, are moving quickly to meet the demand for digital processes. “We have many investors in each fund, and for them, having a fully digital process is crucial. In today’s world, you can’t expect investors to go to a notary, for example,” said Alek Jakima, Director at GP Bullhound.

Jakima also said that his firm is already using AI tools for a range of tasks. He expressed the wish that, in the near future, an app will emerge to help private equity and venture capital investors comprehensively track their portfolios, cash flows, and performance. “That is my dream,” he said. 

Meyel agreed, adding that one of her own “dreams” is greater digitisation in government processes and regulation. “At the moment, there’s still a lot of redundancy. The same question is asked many times, or you have to complete a digital form and still submit paperwork. It takes a lot of extra effort that could easily be avoided,” she said.

On the topic of democratising private equity – making it more accessible to retail investors – Meyel noted that the current regulatory environment poses challenges. “There is a need to open up to retail investors. But right now, it’s just too expensive. I understand that’s not ideal,” she said.

Stadler-Tjan also spoke about the importance of alignment when it comes to environmental, social and governance (ESG) factors in investing. “It is vital to have industry standards that govern ESG,” she said.

All the panelists agreed that the adaptation to – and integration of – AI into workflows is already underway and will accelerate in the near future. “It’s important that we’re able to automate routine, mundane tasks where not a lot of value is added. That will allow people to spend more time on things that truly create value,” said Meyel.

She added that as AI takes over more technical tasks, social skills will become increasingly important. “Because if you can’t stand out with your knowledge alone, you’ll need to differentiate yourself with your social skills,” she said.