The hedge fund industry has entered a new phase with artificial intelligence.

What began as careful experimentation – small pilots, isolated use cases and compliance caveats – is now becoming part of everyday life. Almost every manager is using generative AI in some way, whether to enhance research, analyse risk or streamline investor communication.

But the pace of adoption varies widely, as does the confidence in how to use these tools effectively.

As its application expands, so do the questions. How can firms make sure their teams use these tools safely, consistently and effectively? What does good governance look like in practice? And how are investors weighing the opportunities and risks?

These themes were explored at the Marex Breakfast Briefing in London last week, where Tom Kehoe, Global Head of Research and Communications at AIMA, presented findings from AIMA’s new report, Charting the Course: Lessons from AI Leaders in Alternative Investment – a global study examining how 150 fund managers and 18 institutional investors are navigating the rise of generative AI.

Hosted by Marex’s prime brokerage team, the roundtable gathered an audience to discuss where generative AI is having the greatest impact, and what’s still holding it back.

Three signals from AIMA’s latest research

1. Adoption is broad, and getting deeper

AIMA’s data shows (near) universal use of generative AI across the alternative investment industry. 95% of hedge funds surveyed are already using the technology in some capacity, up from 86% in 2023.

The use cases are widening too:

• Research and data analysis remain the most common applications, but front office use is growing fast.
• 58% of firms expect generative AI to play a larger role in investment decision making over the next year – up from just 20% in 2023.
• Larger, multi-strategy managers are further ahead, while smaller firms are closing the gap, often using publicly available tools under internal guidelines to level the playing field.

The picture mirrors what Marex sees across its client base: curiosity has given way to active experimentation, as managers look for efficiency and insight advantages in a competitive market.

2. Positive impact: investors are paying attention

Investor sentiment is increasingly positive. Nine in ten investors surveyed believe generative AI will enhance hedge fund performance over the next three years, and six in ten say they are more likely to allocate to managers making meaningful investments in its research and implementation.

That optimism is grounded in tangible results, with managers seeing value in:

• Accelerating research and document review
• Supporting real-time risk monitoring and anomaly detection
• Enhancing investor reporting and communication

At the same time, investors expect substance behind the story and are asking tougher questions. Around one-third (29%) now include generative AI specific questions in due diligence questionnaires, focusing on governance, model oversight, IP protection, data privacy and regulatory compliance. Another 29% plan to do so within the year. The message is clear: innovation is welcome, but it must come with control.

3. The challenge: Governance, Skills and Structure

For all the enthusiasm, the report highlights a clear gap between adoption and preparedness.

Around half of smaller managers (those managing less than US$1 billion) report having no restrictions on the use of generative AI tools, compared with tighter controls among larger peers. Meanwhile, just over half of firms have an established use policy, and around one-quarter have already provided staff training on tools, although a further 44% plan to.

The focus is shifting from whether to use generative AI to how to use it safely, consistently and effectively across teams.

• • Data governance and model reliability top the list of concerns.
  • Firms also cite training, education and in-house technical expertise as key hurdles to wider adoption.

From Marex’s perspective as a global prime broker, this balance between innovation and structure will shape the next stage of evolution. Managers that integrate generative AI transparently and consistently – with clear governance and communication to investors – will be best positioned to benefit.

Closing thoughts

The discussion at the Marex x AIMA briefing reflected a shared recognition that generative AI is fast becoming a core capability. The industry is learning in real time, and collaboration between managers, investors and service partners will be essential as the industry works out how to apply it responsibly and at scale.