What two-and-twenty actually buys, line by line, and how AI is repricing each line
Private markets run on one of the most trusted pricing structures in finance, and one ofthe least examined. Two percent of committed capital, twenty percent of the gains. Fordecades, nobody has needed to ask what, precisely, each part of that fee pays for. Thestructure worked, the returns often justified it, and the question stayed academic.
Artificial intelligence is making the question practical. Family offices, now among thefastest-growing allocators in private markets, are already renegotiating the answer.Around 70 percent participate in direct private deals according to Citi’s Global FamilyOffice Report, and S&P Global data shows the value of family office direct investmentsroughly doubled last year to some $13 billion. The commonly cited reasons are control,alignment, and cost. The trend predates AI. What AI changes is what becomes possiblefor a small team, and therefore what the fee is compared against.
So it seems like the right moment to write the document that private markets neverproduced: the itemized invoice. What follows is one attempt, in four line items, with anhonest look at what AI does to the price of each.
Line item one: the work
A meaningful share of what a fund delivers is skilled labor. Market screening, companyanalysis, financial modeling, data room review, transaction coordination, quarterlymonitoring, investor reporting. This work is real, it is demanding, and until recently itrequired a team that only a professional manager could assemble. A typical single familyoffice, running a handful of people across every asset class, simply could not produce itin-house. That capacity gap, more than anything else, is what kept allocators insidefund structures even when they wanted more directness.
This is the line item AI is repricing fastest. A small investment team working with modernAI tools can now screen a sector, analyze a data room, and produce institutional-qualityinvestment materials at a pace that recently required many times the headcount. Thegap has not closed entirely, and doing this well still requires proper systems andgovernance around the technology. But the direction is unambiguous: the laborcomponent of investment management is becoming abundant, and abundant things getcheaper.
Line item two: the access
The second line item is harder to see and much harder to replicate. Funds are paid, inpart, for the deals their clients could not otherwise reach: the company that was neverformally for sale, the founder who returns a particular partner’s call, the allocation in around that closed three times oversubscribed.
AI is genuinely useful at the edges of this. Sourcing tools can now map markets andsurface companies earlier than traditional research ever did. But there is a differencebetween finding a company and being chosen by one. Allocations in competitiveprocesses, invitations into bilateral conversations, and trust built over decades of closedtransactions are relationship assets. They compound over time, they attach to peopleand institutions, and they are scarce precisely because no amount of computationproduces them. For managers who genuinely hold this kind of access, AI does not erodethe value of this line item. If anything, as the labor line gets cheaper everywhere, accessbecomes a larger share of what distinguishes one manager from another.
Line item three: the judgment
The third item is the pattern recognition that comes from evaluating hundreds ofopportunities across multiple cycles: knowing which growth story resembles one thatworked, which management team resembles one that did not, and, perhaps mostvaluably, which deals to decline. Family offices bring deep judgment of their own, oftenfrom building businesses in the very sectors where they now invest, and in those sectorstheir judgment can rival any manager’s. Outside them, experience is not transferable bysoftware. AI can inform judgment, stress-test it, and document it. It does not yetsubstitute for it, and the institutions on both sides of the table that treat AI as an input tojudgment rather than a replacement for it are, in our observation, the ones getting themost from the technology.
There is also a longer-term question here that the whole industry shares. The analyticalwork described in line item one has always doubled as the apprenticeship through whichthe next generation of judgment is formed. As AI absorbs more of that work, funds andfamily offices alike will need to be deliberate about how future investors develop theexperience this line item represents. It is an open question, and worth naming.
Line item four: the stewardship
The final line item is the least discussed and, we suspect, the most underpriced. A fundprovides a defined, professional counterparty: an institution with fiduciary obligations,governance processes, audited reporting, and clear responsibility for outcomes. Whenan investment underperforms, there is a structured relationship through which toassess, respond, and, where necessary, part ways.
A family that invests directly takes on this entire function itself. Many do so successfullyand find it deeply rewarding. The point is not that it should be avoided; it is that it shouldbe priced. Direct investing internalizes all of the diligence, governance, monitoring, anddecision accountability that a manager would otherwise carry, and concentratesoutcomes in fewer positions than a diversified fund holds. Families that go direct with aclear-eyed view of this line item, and with proper systems supporting it, are making aninformed trade. The consideration deserves the same rigor as the investment itself.
Reading the invoice
Put the four items side by side and the picture is more constructive than the word“disruption” suggests.
The labor line is repricing downward, for everyone. This is simply what technology doesto work that can be systematized, and it benefits any organization that adopts it well,funds very much included, since their own cost base falls with it. The access line holdsits value and likely gains prominence. The judgment line stays scarce on both sides ofthe table. The stewardship line becomes something allocators choose consciously:retain it through a manager, internalize it with proper support, or blend the two.
The blend, in fact, is already the market’s revealed preference. Among the fastest growing structures in family office private markets activity is not the standalone directdeal but the co-investment alongside managers, typically at reduced economics on theco-invested capital. Viewed through the invoice, this is a sophisticated outcome:families contribute more of the labor, managers continue providing the access andstewardship, and the economics adjust to reflect the new division. It is not a departurefrom the manager relationship. It is a more precise version of it.
For allocators, the practical takeaway is a planning question worth asking before thenext commitment or the next direct deal: which of these four line items are we buying,which are we now equipped to provide ourselves, and what supports the ones we takein-house? For managers, the same invoice is a positioning question, and an encouragingone: the components of the fee that were hardest to articulate in a bundled world, theaccess, the judgment, the stewardship, are precisely the ones the new environmentprices most visibly.
The fee structure that carried private markets for decades was a bundle, and it workedbecause no one could produce its components separately. AI has made one componentabundant. The result is not the end of the intermediary. It is the beginning of a morelegible market, in which every participant, on either side of the table, gets paid moreprecisely for the value they actually create. Markets tend to reward that kind of clarity,and the institutions that embrace it earliest, funds and families alike, will be the oneswriting the invoices everyone else compares against.
The disclosure
Full transparency: the author leads a platform that serves both sides of this invoice,funds and family offices alike. That position removes any incentive to predict a winner,and it is also precisely the vantage point from which the whole invoice is visible. Readersshould weigh both facts. The article asks only that each participant know which lineitems they are buying, and which they are selling.
Ismail Badereldine is the CEO of FinBursa, the AI-native platform for private markets.
This article reflects the author’s views on industry trends and is provided forinformational purposes only. It does not constitute investment, legal, or tax advice.Figures cited are drawn from public industry research, are indicative, and vary bysource and period. AI-generated analysis, including outputs from any software platform,can contain errors and should always be reviewed by qualified professionals; investmentdecisions should never be based on AI outputs alone.
