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Laxman Pai, Opalesque Asia:

Hedge funds are moving rapidly to integrate generative artificial intelligence (Gen AI) into their investment and operational processes, with investors rewarding managers who demonstrate credible strategies, according to new research from the Alternative Investment Management Association (AIMA).

The global trade body's report, Charting the course: Lessons from AI leaders in alternative investments, finds that 95% of fund managers now use Gen AI in their work, up from 86% in 2023, signaling what AIMA calls a "new era" for the industry. More than half (58%) of managers surveyed expect Gen AI to play a greater role in front-office investment processes over the next year, nearly triple last year's figure of 20%.

Investor sentiment appears to be shifting just as quickly. AIMA's survey shows that 60% of institutional allocators would be more likely to invest in a hedge fund that dedicates meaningful budget to Gen AI research and implementation. Nine in ten investors believe AI integration will positively impact at least some managers' portfolios over the next three years.

"Gen AI is reshaping the operating model of alternative investment firms," said Tom Kehoe, AIMA's global head of research and communications. "The firms that will stand out are those pairing credible investment in capabilities with clear governance and human oversight. Investors are rewarding evidence over rhetoric."

While hedge funds initially turned to AI for administra......................

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