The majority of venture capitalists and private equity firms expect automation and AI adoption to continue playing an outsize role in fund management this year, however uncertainties around ESG reporting requirements are causing some concerns, according to a new report from Dynamo Software.

Based on a snapshot from eighty chief financial officers, fund accountants, and managers over the past eight weeks, the Trends, Challenges, and Insights from Leading PE/VC Fund Accountants report found 70% agreeing that AI adoption will gain more momentum in the sector over 2025, with 61% saying the technology will be pivotal to future investment management.

Just 5% of those questioned said that they expected no significant reliance on automation or AI over the next twelve months.

At least part of the reason such tools have become so vital is the never-ending hunt for more efficiency, with the majority ranking time-consuming reporting processes (64%), along with manual data entry and reconciliation (61%) as their top challenges. 

Meanwhile, 45% said they are looking to technology for enhanced features to manage complex transactions, while 39% reported a need for better automated compliance monitoring tools.

In what has become a rapidly evolving, complex regulatory environment, the importance of these compliance concerns cannot be overstated, with 41% citing keeping up with regulatory changes as a key challenge, and 68% finding the recent barrage of compliance updates disruptive.

“Fund accountants clearly see the opportunity to simplify complexity, reduce manual tasks, and flag irregularities, which frees time for strategic analysis,” said Nield Montgomery, Dynamo Software’s managing director.

“At the same, human oversight is still very much needed to interpret complicated financial data, ensure compliance, and inform strategic investing decisions. 

“We believe the importance of human expertise in this field of accounting explains why a percentage of respondents shared uncertainty about how transformative technology will be this year.”

Changes to ESG reporting are also having a noticeable effect, with fund managers remaining split on their impact. Although 39% anticipate new ESG requirements will have a substantial impact on their work over the coming year, including disruption due to new processes involved, another 50% were not concerned by these changes.

According to Dynamo, that could indicate ESG reporting may be stabilizing for many firms, most likely those that have already established systems and processes in place to meet ESG standards.

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“ESG reporting is in flux and without industry standards, it often varies from fund to fund and from investor to investor,” said Montgomery.

“That can make it difficult to predict how changes will impact workflows and the technology supporting them. 

“The evolving nature of ESG expectations is one of many reasons it’s crucial for fund accountants to have access to configurable reporting platforms that can flex based on the needs of the firm, the fund or the investors they are reporting to.”