Artificial intelligence could help public pension funds looking to cut costs and increase their private markets investments, said Elizabeth Burton, client investment strategist at Goldman Sachs Asset Management.
Burton joined GSAM in 2022 after a stint of just under four years as chief investment officer of the $24 billion Hawaii Employees’ Retirement System, Honolulu. Before then, she was managing director, quantitative strategies group, at the $51.9 billion Maryland State Retirement & Pension System, Baltimore. At GSAM, she works with the manager’s top public pension fund clients advising them on topics like governance, legislation and implementing investment policy changes.
Top of mind for many of these public pension funds is cutting costs, and AI could be especially helpful for funds with smaller investment staffs and fewer resources, Burton said.
In an interview at the Global Alts 2025 conference at Miami Beach, Burton said a lot of state pension funds have mandates to invest locally in the private markets, which can be a challenge because investment consultants are not experts on how to invest in a single local municipality.
“AI could help do the diligence on these deals because they’ll be able to read local data, (and) they’ll be able to help you with analysis,” Burton said. While she said pension funds shouldn’t rely completely on AI to collect data and do analysis, AI could help because of the challenges and costs for investment consultants to complete that work.
“A consultant says, ‘I’ll be happy to do this local investment report for you, but it’s not in our scope. It’s not scalable, so I’m going to have to charge you more for that,’” Burton said. “If you can use AI to generate those reports, it can help. I’m not saying whether or not local investments are good or anything, it’s very specific to where you are, but I think it opens up opportunity to do more and think more thoughtfully about how you can give back to your state.”
Getting better data more quickly on local investments may enable pension funds to go beyond the traditional path of venture capital and contribute to the local economy on the credit side, she said.
Venture capital, she said, can be difficult to maintain in local investment programs because legislative mandates on local investment require all the money involved to remain local, and with a successful venture capital investment, the money will eventually move.
Beyond local investments, Burton said there is the possibility that pension funds will be able to invest into more strategies, particularly in niche areas within private markets.
“In specialty finance, there are probably 30 underlying strategies. (For example), there’s aviation, shipping containers, there’s whiskey, there are railroads,” Burton said. “Really niche things. So how do you go from underwriting a helicopter company to underwriting a railroad? It’s really hard.”
With dozens of different categories, pension funds today do not have the capacity to analyze all the different categories. “With AI, you can scale and do more,” Burton said.
“All these little niche strategies can actually have a chance. You know, with more diligence, more information, you’ll have better investments. Right now, if you’re going to be in a niche private credit, usually you’re going to go to someone who does all the flavors.”
Burton said someone with whom she spoke brought up how much more competition it would bring up if pension funds could invest with more niche strategies.
“It’s always better to have more competition,” Burton said. “Always. Don’t you want better information?”
That easier access to information should make it easier for public pension funds to really improve their private market exposure.
“I have big hopes for it. I think a lot of people are thinking about how it’s going to affect quant. I think it’s going to change private markets, and I’m hoping so. Those are just so hard to underwrite,” she said.
