PE firms embrace AI for compliance but lack use policies

Private equity firms are rapidly integrating artificial intelligence into compliance and regulatory reporting operations, but the industry has failed to establish adequate governance frameworks to manage the associated risks. According to a survey by asset services provider Ocorian covering PE managers across the US and Europe managing a combined $3.51 trillion in assets under management, only 5% of respondents have formal policies governing AI use in compliance and regulatory purposes—a striking contrast to the 89% of firms with established policies for AI-driven investment decision-making.

The governance deficit is particularly acute given widespread AI deployment in compliance functions. Approximately 69% of surveyed managers reported using AI for compliance and regulatory reporting related to deal activity and investment decisions, making compliance one of the highest-adoption areas for the technology across PE operations. This deployment precedes policy formalization by a substantial margin, indicating that risk management frameworks are lagging behind operational implementation. The rapid integration of AI across multiple business functions—including portfolio monitoring and performance analytics (57% of respondents), due diligence and data analysis (44%), and investor communications and LP reporting (41%)—underscores the technology's growing centrality to PE operations.

Infrastructure challenges present an immediate headwind to further AI integration. Seventy percent of respondents identified integrating new technology with existing legacy systems as their most significant technology-related compliance challenge over the next two years. Beyond infrastructure, governance adaptation emerges as a critical concern, with 57% of firms expecting difficulty adjusting AI systems to meet governance requirements. Cybersecurity and data protection vulnerabilities were cited by 56% of respondents as major risks. The industry's current posture—characterized by high adoption rates but low policy coverage—leaves PE firms exposed to regulatory scrutiny, operational failures, and competitive disadvantage as regulatory bodies globally intensify focus on AI governance and data stewardship in financial services.