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Transforming Alternative Investment Strategies with AI

Ai For Alpha's proprietary Decoding technology enables the construction of futures-based transparent and cost-efficient replication portfolios for alternative strategies, including CTAs, Global Macro, and hedge fund global benchmarks. These sophisticated portfolio models have been adopted by leading asset managers and QIS (Quantitative Investment Strategies) desks of major banks to develop high-correlation market-access solutions.

With the Private Equity Liquid Decoding, Ai For Alpha is expanding its expertise to private equity replication, addressing the key challenges of traditional private equity investments: This innovation meets growing investor demand for liquid alternatives to private equity, as exit rates have declined sharply in recent years.

Tackling Private Equity Replication Challenges

"Given the extended lock-up periods, uncertainty on the timing of capital calls and high costs of private equity funds, we saw an opportunity to leverage our technology to create a more efficient and liquid access to private equity-like returns," said Beatrice Guez, CEO of Ai For Alpha.

Ai For Alpha's approach decodes private equity fund behavior by analyzing liquid proxy benchmarks inspired by HBS Erik Stafford research that selects stocks based on fundamental characteristics commonly used by private equity managers. These characteristics typically include low valuation multiples and strong operating profitability.

"While the liquid benchmarks capture the long-term performance of the sector well, they tend to be more volatile than the traditional illiquid benchmarks," says Thomas Jacquot, Chief Revenue Officer. "Our data scientists managed to modify the risk profile of the liquid benchmark by integrating risk mitigation strategies in the replication portfolio allowing to approximate the risk profile of the Cambridge Associates or Preqin private equity indices."

"This is a game changer," adds Guez. "With our Decoding technology, investors can now capture private equity-style returns while maintaining full liquidity. We have effectively recreated the risk-return profile of private equity, but with the daily liquidity."

"Our clients view this strategy as a valuable tool for managing their private equity exposure, enabling them to adjust positions while awaiting capital calls or following redemptions," adds Jacquot.

Enhanced Performance & Defensive Profile

Ai For Alpha's Private Equity Decoding out of sample results from 2012 have demonstrated superior risk-adjusted returns compared with traditional replication strategies, achieving:

• Annual Return: 15.2%
• Sharpe Ratio: 1.12 (comparable to private equity risk-adjusted returns)
• Max Drawdown: 18%
• Return/Max DD: 0.84

About Ai For Alpha:
Ai For Alpha is a leading provider of generative AI and AI-powered investment models to large financial institutions across Europe, the Americas, and Asia. It is based in Paris and was founded in 2020.

Press release

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