AI Will Be a Game Changer for Private Equity Fund Administration
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June 19, 2026
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For those that have not yet outsourced, the question is shifting from “should we outsource?” to “how long can we afford not to?” The advent of AI may mean that the time has finally come. But will the technology fully replace humans? And does the arrival of AI mean that investment managers can simply “set it and forget it?” Almost certainly, the answer to both questions is an emphatic “no.”
The Evolution of Fund Administration
The share of private equity (“PE”) investment managers who outsource fund administration has trended upward, and the trajectory shows no sign of slowing; the global market is projected to grow at 8.1% annually through 2033.1 Fifteen years ago, by contrast, most middle- and back-office functions were highly manual and kept in-house. Staff accountants and administrative personnel handled fund reporting and accounting on Excel and legacy on-premise platforms, with General Partners (“GPs”) maintaining the underlying technology themselves.
Over time, many investment managers realized that outsourcing the accounting and administration to third parties would streamline operations and improve efficiency while also relieving the burden of regulatory compliance or concerns about scalability. Plus, outsourcing enabled them to pass along the cost to the investors instead of keeping the expense of internal operations on the books.
This outsourcing of fund administration enables managers to stay focused on portfolio management, investment strategy formulation and investor relations, while producing transparent reporting, maintaining regulatory compliance and executing scalability with relative ease. Many Limited Partners (“LPs”) value the objectivity and a “second set of eyes” inherent in a third-party administrator, the importance of which was made particularly evident during the 2008 Global Financial Crisis and several notable Ponzi schemes around the same time. Yet private equity managers still self-administer at nearly ten times the rate of hedge funds — an asset class that shifted to outsourced administration years ago.2 What will it take to drive change within these PE organizations?
The Intersection of AI Capabilities and Human Financial Acumen in the PE Space
For PE fund accounting and administration, AI is likely to be transformative for the middle and back office.
First, some processes are highly repeatable and don’t require technical accounting skills. This is typically the case with reconciliations (bank, CAM, etc.), document ingestion and summarization, template population, invoice coding or other similarly administrative processes. Second, AI can deliver scalability in a way that is challenging for organizations that are solely dependent on human capital. That is because no hiring is required and attrition is non-existent. If a new fund is onboarded, a new agent can be implemented almost immediately. Plus, agentic AI solutions can work around the clock, without taking breaks or paid time off.
Yet, the role of a third-party administrator will become even more relevant than it is today. This is because most PE fund managers do not have the financial resources, human capital and expertise to implement and keep up with rapidly evolving technology, given the substantial up-front investment that must be made in advance of deploying agentic technology solutions. This investment includes standardizing processes across the organization, cleansing, processing and managing the upkeep of data, and working through issue exceptions as they arise.
Furthermore, the need for highly skilled human talent will be paramount. While fewer professionals will be required, the ones who support and oversee functions and processes will need to be even stronger and more skilled than they are today. The functions they perform will be even more important and include quality control, implementation of adaptations required to meet regulatory changes and investor requirements, and interfacing with internal and external stakeholders.
The best fund administrators are developing a hybrid approach, investing heavily in both technology and talent, and integrating the efficiencies of automation and the benefits of innovation with the expertise and insights of human professionals. Doing so brings together skilled specialists to review, validate and approve reports, provide strong controls and manage investor relationships while AI technology automates functions such as data aggregation and analysis, repetitive administrative tasks and risk identification.
Where We Go From Here
In Fund Administration 2.0, the most sought-after administrators will not simply process transactions — they will design smarter processes and manage data as a strategic asset. For many legacy providers, that will require a fundamental operating model shift that may be too difficult an obstacle to overcome.
As AI evolves, the fund managers that thrive will be those that combine automation, advanced technology, cybersecurity and specialized technical talent with experienced finance professionals. For many managers, building and maintaining that capability in-house for a non-core function will be difficult to justify, not to mention having the skills to implement and grow it.
Innovative Solutions for PE Fund Managers
So, what to do now? In our experience working with private equity firms, navigating this challenge requires a partner who brings an integrated approach to operating model strategy and implementation from the start. It's a multi-dimensional undertaking in a fast-changing environment, demanding that managers balance internal resources and external expertise. But the stakes are high, and those that fail to take it on may simply fall behind or perish.
About FTI Consulting
FTI Consulting helps fund managers strengthen their operating model through technology-enabled fund administration, tax and advisory services purpose-built for private equity and real estate. As an extension of your internal team, we bring the practical expertise to keep you focused on your business. Contact Josh Herrenkohl at josh.herrenkohl@fticonsulting.com.
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Published
June 19, 2026
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