Tech Explained: Private markets race to modernise tech amid AI & rules in Simple Terms

Private markets firms face rising pressure to overhaul technology, data and reporting as regulatory change and new investor demands reshape the industry ahead of 2026, according to David O’Malley, President and Board Director at LemonEdge.

O’Malley said the most significant shift will come from wider access to private assets for non-institutional and retail investors, matched by tougher expectations on transparency, integration and compliance.

“As we look ahead to private markets in 2026, we can see that the defining force will be the democratisation of capital to open up access to non-institutional and retail investors,” said O’Malley, President and Board Director, LemonEdge.

Regulators in the US and Europe are already reshaping the landscape. In the US, an executive order has signalled a push for alternative assets within retirement plans such as 401(k)s. In Europe, the updated European Long Term Investment Fund regime, known as ELTIF 2.0, aims to broaden the investor base. In the UK, Long-Term Asset Fund structures are emerging as a route for long-horizon investment.

O’Malley said the shift in rules is creating operational strain for managers as they adjust to more frequent and more granular reporting.

“We can already see the pressure for firms to modernise operations, and to enable faster reporting as they move from quarterly cycles to near-real-time reporting. The move from PDFs to interactive, data-driven transparency is part of this,” said O’Malley.

The rise of ‘governance intelligence’

Private markets firms are also standardising tools that only recently counted as innovation, O’Malley said. Automated waterfall calculations, integrated compliance workflows and auditable data lineage are moving from early adoption into core infrastructure.

He said leading firms are focusing on what he described as “governance intelligence”. Under this model, systems link every decision and data element in a connected structure rather than maintaining separate, siloed processes.

“What were considered ‘innovations’ in 2025 – automated waterfall calculations, integrated compliance workflows, and auditable data lineage – will become standard requirements in 2026. The leaders are not just automating processes – they are designing systems around governance intelligence, where every decision and data point is connected,” said O’Malley.

AI inside workflows

O’Malley expects artificial intelligence to play a growing role inside day-to-day operations, with the main impact felt in how people interact with systems rather than in complex fund logic.

He described a move away from separate chatbots towards embedded assistance that sits within the workflow itself.

“The clearest impact of AI in 2026 won’t be in complex fund logic, it will be in how people use the systems that power those processes. We’re entering an era of intelligent assistance – AI-driven, contextual guidance built directly into workflows. It’s not a chatbot bolted on top but an operational layer that understands fund structures and recognises patterns, providing real-time support as people work,” said O’Malley.

He said this type of system will guide users, flag anomalies as they occur and suggest next steps for tasks such as period close or report generation.

“In practice, this means systems that guide users through tasks step by step, explain anomalies as they occur and prompts next actions such as closing a period or generating a report. Over time, the platform learns how teams operate and adapts its guidance so onboarding becomes faster and capability scales across the organisation,” said O’Malley.

O’Malley linked adoption of AI tools with human behaviour and training demands in firms.

“This shift matters because the greatest barrier to digital transformation isn’t functionality, it’s adoption. Platforms fall short when they demand heavy training and rely on super-users, which is often when teams drift back to spreadsheets. Intelligent assistance removes that friction. By embedding AI that coaches users inside the workflow, firms can reduce training effort, lower operational dependency and see faster ROI through fewer errors and quicker closes,” said O’Malley.

He said the foundation for this transition lies in modern, event-driven platforms and consistent data structures.

“The catalyst in 2026 will be the shift to modern, event-driven platforms that create unified, trustworthy, machine-readable data with auditability by default. That data foundation will be what finally enables practical AI that works reliably at scale,” said O’Malley.

Data strategy and integration

O’Malley expects more firms to form dedicated data strategy teams as they confront the link between data quality, analytics and AI outcomes.

“One of the key trends we are likely to see next year is the emergence of growing numbers of data strategy teams. Businesses are increasingly realising they cannot get good results from AI, or even agree on basic numbers without high-quality, easily accessible data,” said O’Malley.

He contrasted the pace of private markets with data-heavy sectors.

“Private markets firms, from front office to back office, have been slower to use modern technology than sectors like consumer goods, which have had large volumes of data for many years. That makes private markets interesting to watch moving forwards because they are now starting to use their data to find useful insights and to spot future trends,” said O’Malley.

Integration across internal systems and with external partners will sit at the centre of competitiveness, he argued.

“The data capability that private equity firms need to get right in 2025 is interoperability. General partners (GPs) and fund administrators need to unify operational, performance, and investor data in one model. Without a single, accurate source of truth, automation and analytics can’t deliver. This is why integration strategy, how systems talk to each other will define competitiveness,” said O’Malley.

Compliance and LP demands

Regulatory reforms in Europe and the US will push managers to invest more heavily in compliance automation and reporting tools, O’Malley said. He pointed to AIFMD II and a focus on cross-border reporting by the European Securities and Markets Authority in Europe, alongside transparency measures from the Securities and Exchange Commission in the US.

“In Europe, AIFMD II (Alternative Investment Fund Managers Directive) and the ESMA (European Securities and Markets Authority) focus on cross-border reporting will drive investment into compliance automation. In the US, SEC transparency reforms will push mid-tier managers to upgrade their tech stack or risk operational drag. The firms that turn compliance into a strategic differentiator will win greatest confidence among LPs (limited partners),” said O’Malley.

He said limited partners are also changing how they assess managers, with expectations shaped by digital experiences in other sectors.

“LPs are done waiting weeks for data they can’t interrogate. They want Netflix-style reporting experiences: intuitive, self-service, and always current. In 2026, LP relations teams that can’t meet this demand risk losing out to platforms that can,” said O’Malley.

Hybrid IT approach

O’Malley predicted a shift towards hybrid technology strategies that mix proprietary tools with external platforms.

“The most forward-thinking firms are adopting a hybrid strategy, retaining proprietary models where it drives differentiation (performance or ESG analytics, for example), but leveraging next-generation platforms for the operational backbone. The real question is not “build or buy” but how easily your core can extend to new asset classes, regulations, or investor demands,” said O’Malley.

He said firms that adapt their architecture for changes in regulation, asset mix and investor expectations will stand out in private markets over the next cycle.