AI Consulting

Liquidity Forecasting Innovation: Boosting Private Equity Investments with AI

Nov 20, 2023

A leading US-based private equity firm faced the intricate challenge of optimizing liquidity management—a critical aspect of financial operations that directly impacts investment potential and compliance. In an industry where traditional methods often fall short, the firm sought to leverage artificial intelligence to gain a more profound understanding of customer behavior and liquidity dynamics. Their goal was to refine their forecasting capabilities, thus maximizing investment in profitable assets while maintaining sufficient liquidity.

What was the business objective?

The private equity firm has outlined a comprehensive objective to leverage the immense potential of Artificial Intelligence in the field of liquidity management and forecasting. By harnessing cutting-edge technologies, the firm aimed to revolutionize the way liquidity is managed, enabling more efficient and effective strategies for optimizing cash flow, risk management, and investment decisions. Through this strategic initiative, the firm wanted to capitalize on the transformative power of AI to enhance liquidity management practices and drive sustainable growth.

  1. Advancing beyond traditional forecasting methods by developing an AI-powered model that provides accurate liquidity predictions, empowering strategic investment decisions.
  2. Gaining a nuanced understanding of market sentiments and liquidity requirements.
  3. Integrating diverse and intricate data sources to achieve highly accurate liquidity forecasts.

Optimization of Investments - Utilizing the insights from the AI model to optimize the firm's investment portfolio, striking a balance between liquid assets and long-term investments.

  1. Determining the minimum viable liquidity needed to avoid opportunity costs.
  2. Allocating resources to the most profitable assets, thereby enhancing overall investment returns.

Compliance and Risk Mitigation - Ensuring that the model adheres to regulatory standards, mitigating risks associated with non-compliance and liquidity shortfalls.

  1. Utilizing predictive analytics to identify and address potential compliance issues proactively.
  2. Reduce financial volatility and enhance stability within the firm's investment strategy.


How did we accomplish it?

Sigmoidal's highly personalized and tailored AI consulting approach, involving the meticulous creation of ethically sound and socially beneficial artificial intelligence, was expertly utilized to tackle the complex and intricate challenges posed by liquidity forecasting. By leveraging cutting-edge technologies and implementing advanced algorithms, Sigmoidal's team of experts diligently worked to ensure accurate and reliable predictions, enabling businesses to make informed decisions and optimize their financial strategies with confidence.

  1. Robust Data Strategy: We initiated a thorough data sourcing and ingestion process, identifying high-impact internal and external data sources, ensuring a breadth of information to fuel our predictive models.
  2. Rigorous Data Preparation: Next, we delved into data curation and preprocessing, employing automated tools and methodologies to clean, validate, and standardize the data, ensuring its integrity for analytical purposes.
  3. Advanced Analytical Execution: With the foundation set, we moved to data analytics, where normalized data met sophisticated machine learning models. The models underwent an iterative process of training and validation within a state-of-the-art ML Pipeline designed to refine their predictive accuracy automatically.
  4. Evaluation results: Following the analytics phase, we meticulously evaluated the models' outcomes, scrutinizing their precision and the validity of their insights to ensure they met the rigorous standards required for financial forecasting.
  5. Actionable Insight Activation: Finally, we transformed these evaluations into business insights. Using cloud-based platforms, we provided the firm with dynamic visualization tools and reporting systems to interpret the results, making the insights accessible and actionable for both technical and non-technical stakeholders.


The Results

The AI consultancy, with its implementation of cutting-edge technology and advanced analytics, has proven to be a game-changer in the global private equity investments landscape. By strategically allocating liquid assets and leveraging improved forecasting capabilities, the firm experienced a remarkable 12% year-on-year rise in investments.

Precision and reliability of the AI model instilled newfound confidence within the firm and empowered decision-makers to proactively seize market opportunities and comply with regulatory requirements. This transformative approach has allowed the firm to stay ahead of the curve and achieve unprecedented success in the ever-evolving financial landscape.

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Technologies used

Regularized Regression: To analyze cash flow components like accounts receivable and credit lines - identifying cyclicality and anomalies.

Time-Series Analysis and GARCH Models: Implemented to capture the volatility clustering effect, in rapidly changing market conditions.

Machine Learning Pipelines: Automated the process of data curation, and model selection.

Savings for the client

$3 million

Revenue boost with the ability to identify and model seasonality in payment flows.


Risk minimization of liquidity shortfalls with a better understanding of the market volatility.

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