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AI Advancements Draw U.S. Asset Managers to Favor Data Centers in 2025: KPMG Survey

 Private Credit Seen as Top ROI, Interest Rate Concerns Persist

January 30, 2025

January 30, 2025 – Data centers have skyrocketed to the number two spot on the list of investment priorities for asset managers due to an increasing demand for artificial intelligence (AI). In fact, 40% of survey respondents stated they plan to prioritize data center investment over the next two years according to the new KPMG 2025 Asset Management Industry Outlook. This compares to 27% six months ago.

“Data centers have emerged as a cornerstone of modern infrastructure,” said Greg Williams, National Sector Leader for Asset Management at KPMG U.S. “As data centers become a more significant component of real estate portfolios, asset managers must adapt to the unique complexities they present in order to maintain competitive advantage in this expanding market.”

This report features insights from more than 100 industry executives, weighing in on the economic environment, strategic business operations, asset allocation and innovative technology impacting the asset management industry.

Additional key findings include:

Confidence in private markets remains robust while growing demand for AI fuels data center investment opportunities.

  • Respondents expect private debt and credit (36%) and private equity (31%) to remain the top asset classes for ROI over the next three years, reflecting continued interest in the space as shown in our previous survey.
  • Real estate (29%) rounds out the top three asset classes for the greatest forecasted ROI over the next three years.
  • While residential/build-to-rent is anticipated to be the top real estate asset class (47%), respondent interest in data centers has increased dramatically, with 40% identifying them as a top real estate asset class for investment over the next two years, compared to just 27% who said the same six months ago.

AI maturity is growing as organizations move from the conceptual to the developmental phase, exploring back to front-office functions.

  • AI maturity is advancing, with organizations shifting from the conceptual phase (down 6 percentage points from 39% to 33%) to the developmental phase (up 13 percentage points from 26% to 39%) compared to KPMG’s July 2024 findings.
  • The majority of respondents are turning to external sources for AI capability development, with 63% leveraging third-party platforms and their built-in features, and 20% enhancing these platforms with additional capabilities.
  • Back-office functions are leading the way in GenAI adoption, with 44% utilizing it for information technology (IT) and 36% for routine communication and content summarization across workflows (e.g., meeting notes, emails, writing assistance).  
  • There is plenty of room to grow with the use of GenAI, considering some of the least commonly used functions for technology were fund management (12%) and portfolio optimization (7%).
  • Top barriers to AI adoption include concerns over data integrity (53%), a lack of awareness and training (45%) and security vulnerabilities (35%), all consistent with the July 2024 survey.

Interest rate fluctuations and economic shifts drive focus to long-term strategy and stability.

  • Interest rate uncertainty (67%) is seen as the most significant factor affecting investment performance; followed by technological advancements (35%) and consumer confidence (34%).
  • Stable market conditions (55%) and reduced financing costs (54%) are the key signals respondents are looking for to determine if the environment for transactions is becoming more favorable.
  • Almost half (46%) believe the Fed funds rate will remain between 3.75% and 4.00% by the end of 2025.

“The rise in the 10-year Treasury yield since the Fed's rate cut in September 2024 signals a broader shift,” said Yelena Maleyev, Senior Economist at KPMG U.S. “Asset managers should pay close attention to trends in long bond yields, which will be crucial to adapting strategies beyond short-term rate movements."

In terms of culture and workforce in today’s environment, balancing work and personal life boundaries (33%) came in as a top concern for the people within their organizations.

  • A majority of organizations (69%) continue to offer a hybrid work model, allowing employees the flexibility to work both remotely and in-office. In contrast, 27% of the organizations represented in the survey stated they are in-office five days a week, while only 5% remain fully remote.
  • Additional top concerns for organizations in today’s environment include fostering meaningful interactions and connections (31%) and ensuring employee engagement and team-building in remote setting (30%).

# # #

About the survey:

KPMG LLP (KPMG) conducted a survey between December 2024 and early January 2025 (commencing after the Dec. 17-18 Federal Open Market Committee meetings), to obtain insights on both economic and strategic initiatives heading into 2025. Responses were collected from more than 100 asset management professionals in the U.S., representing private fund managers, traditional fund managers, publicly traded entities, and institutional investors, investing across various asset classes including real estate, hedge funds, private debt, and private equity. A majority of respondents represent organizations with $2.5B or more assets under management (AUM).

About KPMG LLP
KPMG LLP is the U.S. firm of the KPMG global organization of independent professional services firms providing audit, tax and advisory services. The KPMG global organization operates in 142 countries and territories and has more than 275,000 people working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. KPMG International Limited is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide services to clients.

KPMG is widely recognized for being a great place to work and build a career. Our people share a sense of purpose in the work we do, and a strong commitment to increasing access to education and opportunity, advancing mental health, and supporting community vitality. Learn more at www.kpmg.com/us.

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For media inquiries, contact Terra Kliwinski (tkliwinski@kpmg.com) and Alyssa Mora (alyssamora@kpmg.com).

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