Investors Grapple with AI's Disruptive Impact on Private and Public Markets

The increased agility available in public markets might provide more value than the higher-return expectations in private markets.

Mar. 27, 2026 at 12:12am

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The article discusses the challenges investors face in navigating the disruptive impact of artificial intelligence (AI) on both private and public markets. It highlights the diverging views of CIOs who are attracted to the higher return expectations of private assets, versus the increased agility and adaptability offered by public markets as AI transforms business models across industries. The piece also explores how leading asset owners like CalSTRS are approaching this dynamic environment, emphasizing the need for diversification and dynamic allocation strategies to manage the risks and capitalize on the opportunities presented by the AI revolution.

Why it matters

As AI continues to rapidly evolve and disrupt traditional business models, investors are grappling with how to position their portfolios to navigate this dynamic landscape. The trade-offs between the illiquidity premium of private markets and the agility of public markets are becoming increasingly important considerations, especially as the disruptive impact of AI is difficult to predict. This story highlights the challenges facing institutional investors as they seek to balance return expectations with the need for portfolio flexibility in an AI-driven world.

The details

The article notes that while private market returns may appear attractive compared to public market yields, the illiquidity of private assets can be a hindrance in an environment of rapid AI-driven disruption. It cites examples of software companies owned by private equity firms being blindsided by new AI-powered competitors, leading to potentially significant write-offs. In contrast, the increased agility of public markets allows investors to more easily adjust their portfolios as AI scenarios evolve in unexpected ways. Leading asset owners like CalSTRS are recognizing this trade-off and emphasizing the need for diversification and dynamic allocation strategies to manage AI-related risks and opportunities.

  • In January 2026, EDHEC's research arm SIPA released capital market assumptions showing expected returns for private infrastructure assets exceeding 11% and private equity returns topping 12%.
  • In August 2025, The New York Times published an article stating that billions of dollars in AI investments had not paid off, citing an MIT study claiming 95% of AI projects fail to deliver measurable profit impact within six months.
  • More recently, articles have emerged highlighting the disruptive impact of AI on private equity portfolios, particularly software companies.

The players

Eduard van Gelderen

A former CIO of PSP Investments and head of research at FCLTGlobal, who recently launched an investment management consultancy company Brave Foresight focusing on innovation and artificial intelligence.

Scott Chan

The CIO of the California State Teachers' Retirement System (CalSTRS), a large public pension fund that has publicly expressed interest in AI and started training its analysts and portfolio managers to think about the disruptive effect of AI on their portfolio companies.

Matt Shumer

A general partner at Shumer Capital and the CEO and co-founder of OthersideAI, who stated on social media that the gap between public perception and the current reality of AI is "dangerous" because it's preventing people from preparing.

Jessica Pollock

A researcher at FCLTGlobal, who responded to news about the failure of AI projects to deliver short-term profits by claiming that it does not make much sense to focus on such a short investment horizon.

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What they’re saying

“While each market disruption is different, history tells us this is when diversification and dynamic allocation pay off—in the public and private markets. We are in the early stages of the AI transformation, and there will be future winners and losers that are impossible to predict today, so a diversified portfolio that can adapt dynamically to opportunities and risks as the transformation evolves is the best way for us to manage these risks.”

— Scott Chan, CIO, California State Teachers' Retirement System (CalSTRS)

“The gap between public perception and current reality is now enormous, and that gap is dangerous … because it's preventing people from preparing.”

— Matt Shumer, General Partner, Shumer Capital and CEO/Co-founder, OthersideAI

“There might be some quick wins, but the real benefits are not the obvious productivity gains, but the wholesale redesign of business processes. This takes longer than six months.”

— Jessica Pollock, Researcher, FCLTGlobal

What’s next

The judge in the case will decide on Tuesday whether or not to allow Walker Reed Quinn out on bail.

The takeaway

This story highlights the growing challenges investors face in navigating the disruptive impact of artificial intelligence, as they must balance the higher return expectations of private markets with the increased agility and adaptability offered by public markets. Leading asset owners are emphasizing the need for diversification and dynamic allocation strategies to manage these AI-related risks and capitalize on the opportunities, underscoring the importance of preparing for an unpredictable future shaped by rapid technological change.