[PE Now] How Those Investing Trillions of Won Work with AI

The decisions made by private equity (PE) executives determine the direction of hundreds of billions or even trillions of won in capital. A single judgment they make can change not only fund returns but also the entire industrial landscape. Every day they wrestle with reports and financial statements, while constantly trading hypotheses and counterarguments in their minds. At every stage, this is a domain where not even the slightest error is tolerated.

PE investment reviews typically proceed by exploring industries and companies, formulating an initial hypothesis, validating it through due diligence, and then reaching a conclusion via the investment committee. AI is now pushing beyond merely organizing materials on the periphery of this process and is steadily penetrating deeper inside. Summarizing how senior decision-makers at domestic PE firms are using AI, it is being intensively utilized in three main phases: the research phase, the hypothesis expansion phase, and the cross-checking phase.

◆ Research phase: Knowing already, before the briefing starts = The most common use case is simplifying information acquisition. Before receiving a briefing, they first scan the industry and compress basic materials to save time. Mr. P, CEO of Firm D, uses ChatGPT and Google Gemini to pre-learn the industry structure and key issues before due diligence briefings. Because he receives reports with the basic context already understood, meetings shift from explanation-centered to discussion-centered.

It is the same for Mr. L, CEO of Firm P. He no longer waits for a junior staffer to spend a week compiling materials. He directly poses questions to AI and extracts the key issues within a few hours. As the basic research phase is compressed, human resources can be allocated to more fundamental deal analysis.

◆ Hypothesis expansion phase: Using AI as a "Devil's Advocate" = There is also a deeper level of use: employing AI as a thinking partner. Like a "Devil's Advocate," it intentionally attacks the logic from the opposing side and exposes weaknesses. After feeding in materials on a field or industry they want to understand, they ask questions such as, "What are the weaknesses of this logic?" or "Why can this company succeed or fail?" The greater their conviction, the more aggressively they question. For a specific company, they may even instruct, "Critique this based on these data." In effect, they are obtaining in advance the counterarguments that may arise in the internal investment committee. The view is that decision-making is not about the strength of conviction, but about the ability to withstand rebuttals. AI becomes a tool that rapidly generates those rebuttals.

◆ Verifying AI's verification = Mr. M, CEO of Firm S, describes AI as a "plausible liar." As a specialist in technology investments, he pointed to AI hallucinations as a fatal weakness. After asking specific questions about an actual sale transaction and receiving answers that did not match the facts, he set boundaries for how he would use it. He advised, "If you ask about the detailed terms of a deal, you will never get anything truly helpful," and added, "Instead, it can be very usefully applied to general market analysis or status checks." Mr. M also stressed not to use free versions, having personally felt the difference in stability and response quality.

◆ Not replacement, but an extension of decision-making... Overseas firms are internalizing AI into their organizations = Although PE CEOs differ in the details of how they approach AI, one commonality is clear. AI does not make the decisions; it participates in the thinking process immediately before the decision.

Through this, they reduce the time spent listening to briefings and increase the time spent formulating questions. The speed of hypothesis-building rises, and the intensity of preparing counterarguments increases. In PE, the resource as valuable as capital is judgment itself, namely the quality of decision-making. The CEOs unanimously agreed that AI cannot replace that judgment.

Large overseas PE firms are one step ahead in their journey with AI. Global PE firm Blackstone has built its own generative AI platform to integrate and analyze past investment cases and industry data. During deal reviews, it calls up internal knowledge in real time to reinforce hypotheses and check risks. Beyond experimental use at the individual level, AI has already entered the organization as part of its decision-making infrastructure.