Despite a turbulent start to 2025 for technology stocks, the long-term potential of AI to transform industries and reshape the wider economy remains firmly on asset owners’ radars.

Since OpenAI released ChatGPT at the end of 2022, a growing number of asset managers have been racing to launch thematic funds with exposure to AI-related opportunities. And they have been working hard to demonstrate their credentials by sharing insights on the AI value chain – from model creators to infrastructure providers to corporate applications.

But how is all of this being received by the asset owner community? In our recent On the Pulse Focus Group, we sat down with senior investment leaders at a UK DB pension, a US endowment and a US foundation to discuss what they want to see from fund managers when it comes to investing in AI.

Technical expertise is prized

The asset owners we spoke to all acknowledged that the financial opportunities and risks emanating from AI are looming large as they think about long-term portfolio performance.

But the scale and pace of change – along with the esoteric nature of the technology – means that in-house investment teams are struggling to assess its implications on their own.

“It’s hard to imagine how, as a small team with non-computer science backgrounds, we could really get our arms around a subject so broad and deep that’s just accelerating – so we really have to outsource that to managers,” says an investment officer at a US endowment.

But asset managers will need to demonstrate their own ability to “get their arms around” the disruptive impact of AI if they are to secure asset owners’ confidence.

One of the unknowns at this stage is whether AI will prove to be a winner-takes-all market as has been the case with previous disruptive technologies, or whether a broader base of winners will emerge.

“That’s where I have a lack of knowledge,” says an investment officer at a US foundation. “One thing that surprises me when talking to managers is, I’m not 100% confident that most have the expertise they need to truly understand what’s going on in the AI space.

“If I was looking for an AI manager, I would love someone with a true AI background to be part of that team; that’s how a manager could stand out. You want to have that in-depth knowledge to have conviction in the plays that you’re making.”

Telling a credible story

Evaluating managers’ ability to select AI winners and losers based on performance track record is difficult at this stage because many thematic funds in the space are relatively new.

The asset owners we spoke with say they are looking at several factors to assess credibility.

“If they’ve had track records in similar innovations in the past you can look at what made them successful and whether it is likely they could replicate it,” says the CIO of a UK DB pension. “Then you look at their abilities in terms of idea generation, whether they are plugged into the right ecosystems, whether they have the right team, or if not, will they be able to hire the right talent when there is a lot of competition?”

The investment officer of a US endowment thinks that private market managers currently have a stronger story to tell in this arena. “I feel like the private side is going to be able to find those ‘AI 2.0’ companies. There are definitely some venture capital and PE firms that have some consistency of performance in being able to identify where that hockey puck is going,” he says. “One of our funds was first dollars in Netflix, they were early into Facebook and OpenAI, so there are a select number of groups that have that technical specialisation and informational asymmetry to get in early to a private company that will be the next big disruptor.”

And when it comes to thematic funds, the investment leaders say they would generally favour a broader technology-themed fund that targets AI exposure as part of its strategy over something more concentrated. “I’d look for a manager with a technology fund that has a little bit more diversification, that can also show they are strong within the AI space,” says the investment officer of a US foundation.

Future-proofing the 95%

Of course, not all fund managers are seeking to position themselves as AI investment leaders, but that doesn’t exempt them from the need to demonstrate credible expertise on its disruptive impact.

The CIO of a UK DB pension says given the potential for AI to drive business model obsolescence across a wide range of industries, the need for downside protection and diversification in the wider portfolio is crucial.

“The biggest risk is actually about trying to preserve the 95% I own as opposed to the 5% that I could own by finding the next OpenAI,” he says. “We could be sitting on companies in our equity and fixed income books that have redundant business models in a few years’ time.

“I want to know how my managers are thinking about risk management related to the disruption that well-embedded sectors and industries are facing. Are there any early signs of disruption? Which companies are significantly investing in AI? I want them to be ahead of the curve on those things.”

So, whether fund managers are trying to differentiate themselves as AI investment leaders, or simply build trust in their risk management capabilities, it seems asset owners will increasingly want to see the firms they partner with building out their AI expertise and bringing a credible story to the table.

Joe Dalton is a senior consultant and head of thought leadership at CoreData Group, a global specialist financial services research and strategy consultancy. To find out more about our research programmes with the asset owner community, you can reach him at [email protected]