The new Paradigm of Alternative Investments (ALTS) and how GenAI is transforming this growing area

The President and his team need to be commended for the significant steps taken to expand the type of investments allowed within 401K retirement plans to include Alts such as private equity, real estate and digital assets. While these changes are good for diversification they also introduce new risks and fiduciary responsibilities.

While these changes are good for diversification they also introduce new risks and fiduciary responsibilities. These rules also are tail winds to the continued growth of Alts as evident from Private Clients allocations to Alts estimated to rise to 13 Trillion by 2032. Over 90% of financial advisors now allocate to Alts including private debt, non-traded REITS, Private Credit and Digital assets. Private Credit alone is projected to reach an AUM of $2.6 T by 2029 up from $1.5 T in 2024.

So is all this good news for financial institutions? Yes these present many new ways to grow revenues for financial institutions embracing Alts as strategy but it creates a lot of challenges from an Operations and Technology perspective .

1. Given the non-uniform data sets that exist such as Custody data, data from various platforms, data from various asset managers and the timing and frequency of this data leads to inconsistent formats and reporting styles causing too many analysts to be thrown at this problem before a management meeting for manual aggregation.

2. In a lot of cases there is no readily available market prices for private assets given that they are not liquid and in cases of crypto there is way too much volatility for a report to be precise at all times. Furthermore fair market value calculations are costly and time consuming given external expertise needed as inputs into a model

3. Accurately tracking Capital Calls and distributions is complicated and opportunities for error abound in this area

4. Given multiple investor classes, GPs, LPs, other allocators and complex fee structures do not make it easy to report and create administrative burdens.

Enough said about the problems. How do we solve these problems and given that we have multiple data lakes given the growth of enterprise platforms like Snowflake, Amazon Redshift, Databricks, IBM, Google, Microsoft and others, what are the recommended approaches to solve for this problem.

Several exciting companies are growing in this area of SAAS cloud investment data platforms, and there remain a host of large legacy players including such as Dynamo, Altvia, Blackrock’s Efront, Allvue, Koyfin and others. 

We spoke to industry veteran Pulak Sinha, formerly of Citi and Blackstone, who now is Founder CEO of Pepper to seek his viewpoint on what asset managers and private equity companies should do to come out winners in this area. Pulak acknowledged this growing problem and given his very interesting background has the following observations and recommendations for the industry:

Pulak liked the call outs made in terms of the problems faced by the Industry . “You have rightly mentioned the challenges arising in this space, the complexity in the alts business is rising and will continue to rise as business leaders innovate and new imaginative products are brought to the market. Technology will play an increasingly important role in managing growth, complexity and scale of new business challenges” said Pulak. 

The biggest long-term differentiator will be the design and redesign of the strategic architecture for each fund manager, he added. 

Traditional systems—often built around on-premise, monolithic platforms—struggle to keep up with the growing complexity and data intensity of today's private markets. For example, when a new set of technologies like the AI/ML toolsets come to market, legacy systems cannot easily integrate them into their core architecture. In contrast, cloud-native, modular architecture offers a flexible and scalable foundation that allows asset managers to build and evolve systems that are tailored to their strategies, asset classes, and operational models. This shift is not just about faster processing or cheaper infrastructure, it’s about unlocking entirely new capabilities around data, automation, workflows, capabilities and responsiveness.

One of the most significant changes modern architecture brings is the unification and accessibility of data. By leveraging service-oriented and event-driven design, firms can decouple data from legacy silos and expose it across functions in real-time. This allows investment teams, risk managers, compliance officers, and client services teams to operate from a single source of truth. For alternative asset managers, who often manage complex portfolios across private credit, real estate, infrastructure, and secondaries, this unified data layer is essential to understanding exposures, managing risk, and delivering accurate, timely reporting to LPs and regulators.

Cloud architecture enables greater agility through the use of APIs, microservices, and containerized applications. This means that managers can adapt more quickly to new strategies, reporting requirements, or regulatory demands without needing to replatform or initiate costly re-architecting efforts. For example, onboarding a new loan administration workflow or integrating a complex allocation engine can be done incrementally plugging into the system via APIs rather than altering core infrastructure. This modularity empowers IT and operations teams to act as business enablers rather than cost centers and allows the firm to scale more intelligently.

The adoption of cloud-native systems enhances security, reliability, and collaboration across geographies. With distributed architecture and tools for continuous integration and deployment, alternative asset managers can innovate faster while maintaining high standards for governance and control. 

In conclusion, Pulak and I felt that “The global nature of private capital today demands real-time coordination between deal teams, fund administrators, legal, and finance teams—many of whom are not in the same location. Modern platforms that support secure, permissioned access and real-time data sharing make this collaboration not only possible but seamless. Over time, firms that adopt these architectural shifts will outpace their peers in efficiency, adaptability, and investor satisfaction.”

It is early days, but our AI business unit at Hexaware has been busy choreographing new operating models that leverage AI in areas such as Deal Sourcing & Screening, Agentic models for due diligence and AI driven tools for risk management . Given that each asset manager and Private Equity business is somewhat unique in terms of data challenges we see more “builds” than “Buys” working closely with the AI Startup ecosystem.