Deal-by-Deal Investments: Pockets of Alpha in the AI Era

It’s quite an interesting observation shared by Nicolai Tangen, CEO of Norges Bank Investment Management, which manages Norway’s sovereign wealth fund: volatility in public markets, specifically in AI stocks, can significantly reduce a fund’s value.

At the same time, we observe cases like Situational Awareness, where people with an understanding of private companies in the AI space can pursue outsized returns. A lot of cutting-edge, emerging technology is being developed in private companies, and investors with exposure to that ecosystem can, to some extent, anticipate developments in public markets.

With Situational Awareness, the strategy ran into difficulties as leverage and deteriorating liquidity amplified losses. But even after that, Leopold Aschenbrenner’s fund still retained substantial gains: Reuters reported that it remained approximately 80% up for the year after losing 67% in July 2026.

At the same time, we observe that funds with private-equity exposure experience challenges with timely exits. This has supported the growth of continuation vehicles and secondaries.

In this context, I think deal-by-deal investments sound like a reasonable solution.

With deal-by-deal investments, institutional investors are not committing capital to a blind pool under a long-term mandate whose underlying assumptions can quickly become less relevant in times of emerging technologies. They choose each investment individually, although capital committed to each deal can still remain locked up for years.

At the same time, they gain exposure to private-equity deals with a defined, underwritten value-creation strategy and potentially greater scope to influence value creation than through minority investments in public companies. For example, management can pursue long-term operational improvements without the same pressure to meet quarterly analyst expectations.

In this respect, deal-by-deal co-investments through acquisition platforms like SBC Capital can become potential “pockets of alpha” for institutional investors concerned about overvaluation risks in public markets—the kind of concern raised by Tangen.

At the same time, this gives institutions whose mandates permit private equity an option to participate in individual deals while reducing the risk of committing to a blind-pool strategy that may no longer fit the investment environment.

References

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