Today, technology has reshaped all industries, including the investment sector. Especially when we look at the alternative fund landscape, technology has so much to offer to transform alternative investments.

As market numbers, investment generations, and broad investment opportunities change in various forms, Alternative Investment Funds (AIFs) are also on the path to growth in a maturing economy. However, the technology will ultimately determine the growth of investments in alternative investment funds.

Let’s understand the landscape of alternative investments to identify their need for technology.

The Landscape of Alternative Investments

Alternative investment funds have become the preferred choice among domestic and international investors. Over the last five years, the alternative investment fund landscape in India has delivered excellent results with continued growth.

According to the Securities and Exchange Board of India (SEBI), total investment in AIFs stood at Rs 84,473.02 crore in September 2018, rising to Rs 3,99,653.19 crore. December 2023 has shown how investors decide on more alternative investment funds as investment objects.

The growth of investments in alternative investment funds also points to future challenges, unexpected changes, ESG (environmental, social, and governance) problems, methods, systems, management, technology requirements, etc.

In this blog, we discuss the technology requirements of AIFs.

Requirement of Technology in AIFs

Managing alternative investment funds requires your paramount observation of fund accounting, computing Net Asset value (NAV), Management Information System (MIS) reporting, executing capital calls, distributing cash flows to investors, etc.

Currently, most of the AIF management companies are using manual processes, which are time-consuming, have limited scaling and possibilities of errors, etc. 

Through technology, these manual processes are becoming automated in most organizations. With the help of automation and artificial intelligence, the processes of monitoring the performance of funds, getting NAV updates, identifying and managing risks, etc. are now easy to proceed.

But do you know why technology will soon play a vital role in alternative investment funds?  

Here is WHY:

Role of Technology in AIFs

Top 8 Roles of Technology in Transforming the Alternative Investment Funds Landscape:

• In Data Management

Investments, finance, and accounting mean vast amounts of data that must be stored and maintained effectively. Manually managing information about investors and their investments, total assets, accounting, and fund and investment calculations can leave room for error.

As a fund manager, you need to move to a tool, system, or application to manage this massive data, where technology identifies and simplifies the data to keep it more secure.

• In Investor Onboarding

If you are available on the Internet as a website or application, it is much easier to find investors. You can get investors by updating your fund’s progress and performance on your fund’s website or app.

The onboarding process of an investor is so much crucial for any AIF manager where you need to identify the investor’s background, history, net worth, etc. This is where an investor engagement tool or application can help you increase the effectiveness of your analysis.

• In Investor Reporting

Technology plays an integral role in investor reporting, providing AIF investors with reports on fund performance, market conditions, routine updates, NAV status, and more.

• In Analysis and Reports

Overall Analysis and Reports for managing your funds are also available to you through a technical tool that can research, analyze, and measure your fund’s overall performance in the investment market with investments made in various sectors of funds.

• In Deal Sourcing

Every AIF is an investment opportunity for an investor. However, if you, as a fund manager, offer an investment opportunity through technology, effectively simplifying investor performance, it is easy for your AIF to stand out from the list of investors’ priorities.

• In Compliance and Risk

Risk measurement and compliance management are important parts of AIF. Every investor wants to know what compliance the fund follows and why. Technical automated tools help analyze the risk management of an AIF and also clarify the compliance of the AIF with the requirements.

• In Portfolio Monitoring

As an investor, using the technical tools of the investment object, you can monitor your investment portfolio in real-time and periodically provide updates on the market development of the entire portfolio.

• In Regulatory Tracking

The technology allows monitoring changes in the regulation of alternative investment funds. When SEBI updates regulations, changes rules, or introduces new AIF laws or guidelines, the AI-enhanced AIF tool can update much faster.

Thus, technology based on alternative investment platforms, automation, artificial intelligence technology, blockchain technology, etc. can help you manage AIFs safely and transparently, whether you are an investor or a fund manager.

The Role of Artificial Intelligence (AI) in Alternative Investments (AIFs)

You may be aware that Artificial Intelligence (AI) has started its foundation in all industries and sectors. The investment industry is not excluded from the futuristic use of artificial intelligence in alternative investments.

The most dynamic technology in AI is changing the fundamental methodology of alternative investments with its innovative technology and strong data system.

Let’s discuss how AI can affect alternative investments:

• Market Analysis

AI is going to plays a major role in the market analysis of alternative investments. AI can help with market analysis using the giant database of amounts, investments, funds, trades, lists, etc. 

• Potential Growth

Every investor should first check the growth potential of alternative investments. Here, the use of AI in alternative investment funds makes it easier for investors to determine the growth potential of their investments.

• Risk Management

One of the most important roles of AI is risk measurement. Every investor has risk, and every investor tries to manage it. Thanks to AI, fund risk management has become convenient and investors can trust it.

• Investment Strategies

AI can create individually tailored investment strategies for investors. This AI feature helps investors find the right investment strategy based on investment objectives, investment profile, risk tolerance, and market conditions.

• Potential Loss

Thanks to its fast analysis and research ability, AI can quickly assess the potential loss of any alternative investment. The loss is as constant as the return on investment; However, using artificial intelligence in alternative investment funds can help investors save from large losses and reduce losses.

• Possible Opportunities

AI can also foresee possible investment opportunities across various industries. Investors get updates on upcoming opportunities with the help of AI.

• Importance of ESG

Environment, Society, and Government (ESG) are always concerned with looking for any investor before investing. This is where AI can help discover, analyze, and refine ESG-proven alternative investment opportunities for investors.

• Ethical Investments

AI is going to help investors pay attention to ethical investment, a type of investment after they have considered its moral position.

Advantages of Technology in AIFs

• Efficiency in Use

You can use an AI tool or application more effectively because it simplifies your fund’s investments, NAV status, market updates, overall performance, etc.

• Accuracy in Results

A technical tool based on massive market and investment data can be the main profit predictor for the future development of AIFs. However, the level of accuracy of a tool lies in how effectively it is programmed.

• Monitoring Performance

When you develop an application to manage and monitor the performance of your funds, it helps to measure the performance of funds in real-time, their performance. The highs and lows of the market, the dangers, and benefits of the funds shortly, etc.

• Reduced Costs

Once you develop an all-in-one tool for AIFs, costs are reduced. After making the tool, you just need to maintain it so that it works properly and all your AIF problems can be solved by its automation.

• Easy for Investors

As an investor, the investment process becomes much easier, so you can get information about your investment funds with just one tap. You can easily track your fund’s performance, market insights, status, NAV status, etc.

• Automated Process

Automating the manual process of alternative investment funds helps you as a fund manager determine the strategy and execution of your next entry. The automated process of AIFs using technology offers the advantage of quick decision-making.

• Real-Time Access

One of the most significant benefits of using technology in AIFs is its real-time access advantage. You can access the information, performance, updates, and status related to your alternative investments in real time.

Way Forward

In this digitally renewed world, time is moving towards more and more technological ways of using services, and that includes investment services. At Steptrade Share Services Pvt. Ltd., we leverage cutting-edge technology for Alternative Investment Fund (AIF) management, ensuring our clients benefit from the latest advancements in financial technology. Currently, we have 2 active AIFs in the market, both designed to maximize returns and minimize risks through sophisticated investment strategies and data-driven insights.