Brian Daly, Michael Kahn Quoted by Private Equity Law Report in Part Two of Series on AI in Private Funds

For its article “Embracing AI in Private Funds: Challenges, Best Practices for Implementation and the Road Ahead (Part Two of Two),” Private Equity Law Report quoted Akin investment management & private equity partner Brian Daly and intellectual property (IP) partner Michael Kahn.

Second in a two‑part series, this article addresses the issues that AI raises for private equity, including ensuring privacy, preventing discrimination and maintaining quality control. Brian and Michael are quoted throughout.

A few highlights:

• Michael noted that the evolving narrative of AI in the private fund industry unfolds as a striking duality. It shows a promising trajectory as a beacon of operational efficiency and enhanced decision‑making capabilities. However, the industry must acknowledge it as a double‑edged sword that comes with considerable risk and compliance challenges. The growing adoption of AI emphasizes the importance of establishing robust regulatory frameworks and best practices to mitigate potential pitfalls, he said.
• “AI can both enhance and threaten cybersecurity. Although it offers valuable tools for identifying and countering cyber threats, it can also be used maliciously to facilitate the development of adaptive malware and targeted phishing schemes. In light of this emerging threat landscape, fund managers must remain vigilant and implement best practices – e.g., perform regular security assessments and download the latest security patches – to protect their digital infrastructure,” said Brian.
• “There has to be a distinction between the use of publicly facing data and internal proprietary or confidential information,” said Michael. Contractual agreements and non‑disclosure or confidentiality arrangements between companies and their employees, vendors and partners are all at risk depending on the categories of data and AI models being used, he said. Fund managers must consider not only the potential breach of those agreements but also the possibility of trade secret misappropriation or theft when engaging AI vendors and contractors, he added.
• Michael said that the adrenaline rush of innovation is exhilarating, but noted that stakeholders must be vigilant in their comprehension and adherence to the continuously shapeshifting norms. “What may be regarded as responsible conduct in terms of use today may be out‑of‑date a month from today,” he said.
• On the topic of cybersecurity risk, Brian said that fund managers generally fall into two camps. First, some managers do not allow their personnel to put anything outside their walled garden, which implies they have licensed AI tools residing within their firewall. “In that context, any update or interaction with external data must happen in a very auditable, controlled manner,” he noted. Alternatively, he noted that some fund managers employ a policy of non‑sharing of any firm‑specific or confidential client information on the internet.

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