Hedge funds use AI daily to support credit research

A Barclays survey of 410 institutional investors across North America, Europe, the Middle East and Asia found hedge funds are using artificial intelligence every day to support credit research, data analysis and idea generation. The bank’s research shows firms are deploying AI to improve workflows rather than to replace investment professionals.

Nearly three-quarters of hedge fund respondents reported daily AI use, a higher rate than long-only managers and asset owners. Barclays’ survey, prepared by strategists Zornitsa Todorova and Andrea Diaz Lafuente, says adoption has moved beyond pilot projects into routine operations for many buy‑side firms.

Respondents most commonly use AI for investment research, processing large data sets, generating trade ideas and speeding up analysis. Modelling, risk assessment and security screening were also listed among leading applications. Most firms reported that AI currently plays a small role in trade execution and portfolio construction.

The report notes the credit market has shifted toward greater electronic trading, but AI-driven execution is at an early stage for many institutional investors. Survey participants identified data security and privacy as the main barriers to wider AI adoption, citing concerns about handling sensitive trading information, protecting proprietary models and safeguarding client data. Regulatory uncertainty, compliance requirements and internal resistance to change were also named as obstacles.

Barclays found differences in operating models explain part of the gap in adoption. Hedge funds, which often run faster-moving strategies, use AI more frequently, while asset owners with longer investment horizons and more formal governance reported slower uptake.

Most investors surveyed expect AI to change workflows and responsibilities across investment teams without causing major headcount reductions in the near term. Only a small minority indicated they expect meaningful staff cuts. Barclays’ strategists noted firms expanding AI use will need to address operational, regulatory and data-governance challenges to integrate the tools into existing investment processes.