South Korean regulator adopts AI for PE

FSS is currently seeking a provider to develop the technology
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The South Korean financial regulator has announced plans to introduce an AI screening process for examining private equity fund documentation.

The development follows a notable uptick in the establishment of domestic private equity vehicles, after a government policy overhaul in October 2015. In 2018, 6,852 new private equity funds were registered, according to the regulator.

The Financial Supervisory Service (FSS), has launched a process to source and engage a company that will design an AI system capable of reviewing the terms and conditions of new private equity funds.

The initiative forms part of the FSS’s wider plans to develop a smart financial supervisory system that uses innovative technologies.

As part of the AI system’s development, the FSS will use private equity fund documents previously submitted in order to determine learning data, and to create and AI engine, able to assess the appropriateness of T&Cs through guided learning.

While the adoption of AI for fund document screening in South Korea may at first only impact domestic managers, it will be interesting to observe how other national financial watchdogs react to this development, and if we will see greater use of this kind of technology when it comes to supervision.

For more on South Korea’s burgeoning private equity market, check out Preqin’s recent blog post, which touches on regulatory changes, as well as key stats on activity.

And for more on South Korean investor trends, and tips for fundraising in the country, read The Drawdown’s Boarding Pass feature.