Tech-Driven Alpha in Private Markets

Similarly, despite the scale and sophistication of alternative investments today, many investors are still navigating the management of these portfolios through complex operating models rooted in fragmented systems, manual processes and static data.

While there has been a proliferation of technology delivering point solutions to address these challenges, the private markets evolution that is underway and powered by artificial intelligence (AI) can create the advanced digital foundation needed to help investors move beyond operational efficiency improvements to drive alpha in private markets portfolios.

To take the pulse on where asset owners are on the tech transformation journey, BNY, in collaboration with Stanford’s Research Institute for Long-Term Investing (SLTI), surveyed nearly 20 asset owners representing over $1 trillion in assets under management (AUM). Their views illustrate the challenges and opportunities of investing in alternative assets and give a glimpse into the potential industry-wide transformation. 

Alternatives have become a core portfolio pillar

Over the past decade, alternatives have evolved into a core part of portfolio allocation for many institutional investors, driven by the pursuit of higher yields and diversification. With global alternatives AUM projected to reach $29.2 trillion by 2029, the alternative investment landscape is expanding rapidly, encompassing new asset classes and fund structures.¹ Traditionally dominated by private equity and hedge funds, infrastructure and private credit are emerging as key growth areas, driven by demand for digital infrastructure, climate investing and innovative financing solutions. As the nature of these assets and funds becomes increasingly complex, with nuanced investment strategies, varied liquidity profiles and intricate risk dynamics, investors are facing new challenges in managing their portfolios effectively. To address investment constraints around liquidity, thematic exposure and returns, investors are using various structures like semi-liquid funds, rated notes, and separately managed accounts.

While the long-term growth drivers remain intact, the current macroeconomic environment has underscored the challenges of managing private market portfolios, highlighting the need for dynamic portfolio management, advanced technology solutions and a unified view of risk and exposures amidst market volatility.

Navigating management complexities of alternative assets

The growth and expansion of alternatives investing comes with the added operational complexity of managing these portfolios. Unlike public securities, alternatives typically require a set of nonstandard documents and unstructured data, which creates operational challenges in overseeing portfolios and measuring performance. Most of the asset owners surveyed reported that significant barriers to increasing their alternative investments allocation include the heavily manual or bespoke processes required to oversee holdings (75%), as well as the challenges of extracting and normalizing fund and asset data (67%) (Figure 1).

Figure 1: Operational Barriers to Investing in Alternatives

_{Percentage of responses ranked highest or high barrier}

_{Source: BNY/SLTI 2025 Survey.}

In addition to the complexity of the information received, a diverse set of tools is used across asset classes. Almost half of respondents (44%) note that they use three to five systems or technologies to support their alternatives operations, typically across areas such as accounting, reporting and data management. While investors are moving basic tools, such as spreadsheets, to manage their businesses, the level of sophistication often varies based on their size and operational budget. In short, investors are plotting the course of their alternatives investment journey with varying sets of manual and online directions to guide the way. 

Technology at a tipping point, but barriers remain

To address the expansion and complexity of their business, asset owners are taking steps to optimize processes, working with fund administrators and other partners who can provide scalable tech solutions to support their growth and offer access to an expanding set of private market technologies. Today, these solutions primarily serve to offload key middle-and back-office functions in areas such as digital data extraction and reporting, which helps reduce risk from manual processes and free up internal resources. However, as information becomes more digitized, asset owners are looking for solutions that can do more than just keep the engine running. Nearly half of asset owners surveyed (45%) are pursuing advanced technology tools to aid in portfolio  monitoring and performance and analytics, while a quarter (23%) are seeking help with establishing intelligent data systems (Figure 2). Asset owners are searching for fund information more quickly and want the ability to consolidate across many information sources so they can secure a more robust view of their private market exposures and a better understanding of how those exposures are changing over time. Solutions driven by accurate, real-time data can quickly surface insights and inform decision-making, keeping investors on course even when faced with unexpected detours.

Figure 2: Asset Owners Seek Tools for Improved Investment Decision-Making

_{In what areas are you looking for new solutions from partners or service providers?}

_{Source: BNY/SLTI 2025 Survey}

Can AI save the day? 

To manage the growth and complexity of private markets, some asset owners have begun utilizing AI, particularly to support their operational processes, with 71% of respondents indicating that AI is at least minimally integrated into their operations (Figure 3). AI can be a key tool in helping to solve the challenge of unstructured data. A growing number of investors are using tools to extract data and digitize documents and reports, creating a growing collection of previously unavailable private market data.

Figure 3: Exploring AI's Untapped Promise

While AI is proving to be a significant force amplifier for industry players that leverage the technology to largely automate repetitive, detail-intensive processes, it has not yet delivered on its full promise. The complex nature of private market assets and processes necessitates specialized AI that can analyze the nuances of alternatives data, workflows and reporting to provide better exception management and reduce the need for human-driven processes. Additionally, as AI tools continue to evolve and the digitized data sets create a more expansive set of training data, these tools can support key decision-making processes such as analyzing risk exposures and assessing valuations, which will catalyze more investment into alternatives.

However, the growth of AI introduces new risks, particularly around information accuracy and security, and investors are being thoughtful in how they are integrating it as part of their overall operational governance and design. 

Data is key to unlocking more alternatives investing

Just like the evolution of GPS systems, data is crucial to the potential of technology in the investment, management and administration of private markets. Today, asset owners face challenges in getting usable data to help them measure and manage the performance of their portfolios. Data is often fragmented, delivered from different sources, over varying time periods, in different formats with different entity identifiers (Figure 4). Asset owners seeking a consolidated review of their portfolios often struggle to create a single source of truth for their portfolio that can provide a vantage point to a clean set of information on all of their underlying assets to fully understand exposures.

It is difficult to overstate the value of getting underlying data in order. Building a strong foundation of clean and structured data is among the first and most important steps towards readying organizations to maximize the value of AI and the future transformational promise which it holds. 

Figure 4: The Road Ahead: A Strong Data Foundation is Key

_{Please identify the top three challenges associated with receiving and utilizing private markets data today}

_{Source: BNY/SLTI 2025 Survey.}

Conclusion 

Against the backdrop of a changing public markets investing landscape, alternative investments have become a key tool in driving alpha in an institutional portfolio. The next generation of private markets technology, along with the advances in AI, has the potential to further transform alternatives investing and enable dynamic management of the total portfolio. For investors, success increasingly depends on having the right tools and infrastructure to support real-time decision making to help navigate growing complexity and managing risk across diverse private market exposures.