In Conversation with Convergence, Episode 46: George Evans and Joe Fisher of KPMG Discuss AI in Audit and the Alternatives Outlook

Who is Joe Fisher, and what does he do at KPMG?

George Evans welcomes listeners to the 46th episode of In Conversation with Convergence, a monthly podcast featuring clients and special guests. He introduces Joe Fisher, whom he calls an old friend, a senior lead partner at KPMG and a recognized expert in the alternatives industry. Fisher says he appreciates the partnership between KPMG and Convergence, and Evans says both firms keep looking for ways to add value. At the end of the episode Evans thanks Fisher and KPMG for that partnership.

Fisher says he has over 30 years of public accounting experience and that this was his 32nd busy season. He says he audits alternative asset managers, including private equity, hedge funds, venture capital, and hard-to-value securities, having started by auditing banks and broker-dealers, including a large investment bank known for mortgages, which led to auditing one of the largest mortgage-backed securities funds in the world. He says he is one of KPMG's asset management growth leaders in the Northeast, a subject matter expert who consults with engagement teams on audit, accounting, and valuation issues, and one of the firm's transition specialists, having moved fund complexes with combined AUM greater than $150 billion to new audit platforms.

Fisher says he is also a global board member of Help for Children, formerly Hedge Funds Care, a charity focused on preventing and treating child abuse. He says its 25th anniversary gala is on May 20, 2025.

What is KPMG's asset management audit practice?

Evans notes that more than 500 audit firms are named in SEC filings and that most of the business probably follows a 90/10 rule. Fisher describes KPMG as a Big Four, multidisciplinary firm of approximately 273,000 people in 142 countries, serving clients in audit, tax, and advisory. He says asset management is a firm priority and KPMG's largest industry sector, with double-digit growth over the last number of years.

Fisher says the practice audits public funds, advisers, hedge funds, private equity, venture capital, credit funds, and real estate funds, and that KPMG is a market leader serving crypto and digital funds and sovereign wealth funds. He says HFM has named KPMG best overall auditor five years in a row and that he values the consistency.

What differentiates KPMG, according to Fisher?

Evans notes that in the old days people said going to a Big Four firm was like buying IBM and asks what makes KPMG different. Fisher says the elevator pitch is KPMG's technology tools and its risk-based approach. He says KPMG's technology can test ownership and existence, test realized gains and losses, and roll forward costs in a matter of minutes.

Fisher says the second differentiator is people: their expertise, responsiveness, and proactivity, empowered to make decisions in the field. He says KPMG does not operate in a black box, giving two examples. One is valuation: quants and model experts help value hard-to-value private equity and esoteric investments, the valuation team is part of the audit team, and the auditors sign off on the valuation. The other is the national office, where depending on client size KPMG assigns national office practitioners to engagement teams through a liaison program, with a direct line to national office and access to the client.

Fisher says KPMG aims to give clients a boutique firm feel, with partner, director, senior manager, and manager involvement, along with the global breadth and depth of KPMG, and sums it up as high touch, high technology.

How is KPMG using AI in audits?

Evans says Convergence has been doing AI for years, including algorithms and business intelligence. Fisher says KPMG has also worked with AI for many years, believes it will improve the quality and insights professionals draw from audit work, and acknowledges that people must be trained to use it fully. He says KPMG's approach rests on strategic partnerships, responsibility and governance, and cross-functional coordination among audit, tax, and advisory. As an example of a partnership, he describes a $2 billion relationship with Microsoft that he says some competitors cannot enter into.

Fisher gives three examples. First, auditors can query a couple of hundred financial statements and learn in seconds which use US GAAP, IFRS, or another comprehensive basis of accounting, which have off-calendar year ends, and what fees they show, work he says would have taken days. He says he read a statistic that AI saves practitioners about three days a month but that it has not been audited. Second, a lease agreement that may run 50 pages can be loaded into KPMG's tools to pull key terms and calculate amortized rent over 10 years, accounting for free rent and escalation, in seconds. Third, KPMG can put a set of bonds into its systems to spit out valuation outliers, which supports its risk-based approach, and it can share the outliers above and below expectations with clients during the audit, who he says like it.

Evans says what matters is the business intelligence, trends, time series, and forward-looking views AI makes possible. He says Convergence uses predictive analytics on new fund launches, predicting which advisers will launch funds based on 12 years of launch history, and is getting it about 72% right, and that firms like Convergence and KPMG are just at the beginning of what can be done.

What does Fisher expect from the new administration on regulation, tax, and ESG?

Evans says that about eight weeks into the new administration he wants Fisher's view of the impact so far and says the conversation is not about parties. Fisher stresses that this is his personal view and that he is not a lawyer. On regulation, he expects a deregulatory approach, which he says has been in the works for months, pointing to the Fifth Circuit striking down the private funds rule, which he places in June 2024. He sees a pivot to a friendlier, pro-digital asset environment, citing press reports that the SEC planned to drop its lawsuit against Coinbase. He says investment managers must still stay vigilant and maintain sound compliance and robust internal controls, and should not take their foot off the gas.

On tax, Fisher says there is not much detail yet. He cites news from the White House about potentially ending the carried interest tax break for private equity fund managers and ending special tax breaks for billionaire sports team owners, and says practitioners should keep monitoring tax legislation. He also notes a mention of expanding the state and local tax (SALT) deduction, which he calls good news living in the Northeast. Evans adds that the NFL now allows outside ownership of 10% and that private equity has invested in other sports for a long time, and that it is very early to have a solid view of the tax agenda.

On ESG, Fisher says he thinks the administration will roll back and amend some SEC rules promoting ESG disclosure, creating a difference from the disclosure rules in Europe. He says overall there will be greater flexibility and reduced regulatory burdens, which should promote growth and investment opportunities, but that strong compliance and risk management practices still matter. Evans calls it a double-edged sword: it opens the market for growth, but oversight is still needed in the right areas.

How does Fisher see the market, operating models, and talent?

Fisher says the broad indices have grown at double digits over the last two years, with the S&P up 20-plus percent, and that expectations should be reset. He says the democratization of alternatives is good for the market and investors because it expands eligibility. He says investment managers still face a drag on operating margins and the same outsource-versus-insource questions, with technology expensive, and that the big are getting bigger: he cites a BlackRock acquisition and TPG acquisitions this year and says larger firms offer a menu of products as strategies converge.

Fisher says the war for talent is sticking out, with larger firms having the war chest to hire the right talent and skill sets. Evans says people thought the war for talent was only a COVID issue but he does not think it is, and that the bigger firms benefit. Fisher recalls an earlier conversation about two and a half years before, when he said the pendulum would swing back toward employers on return to office, and says it has swung back, though not all the way, with more firms requiring more time in the office. He says in-person work helps learning, camaraderie, and team building and is more efficient, since he can walk into a colleague's office with a quick question. Evans says a new question is how funds can use AI more effectively in investing and operations, and that change is rapid.

What is Fisher's outlook by asset class?

Asked about headwinds in private equity, hedge funds, debt, and secondaries, Fisher says private equity has good momentum: M&A is coming back, dealmakers want to transact, and he sees activity in energy, infrastructure, data centers, AI data centers, power, and health, with strong pipelines and a nice upturn ahead. He says some statistics expect private equity AUM to double by the end of the decade.

For hedge funds, Fisher says some statistics suggest the industry could become a $5.7 trillion industry by the end of the decade, a 4% compound annual growth rate (CAGR). He says 2024 performance was good, fundraising is still tricky and slow, and startup launches have subsided over the last four to five months.

For private credit, Fisher says interest rates are enhancing returns, and that deregulation could boost M&A, which helps private equity, while also providing more opportunities to lend. He says middle-market investing is probably a strong place to invest now, especially for companies that do not rely on the global supply chain or worry about tariffs. He says secondaries remain strong as limited partners face liquidity constraints and GP stakes still have positive momentum.

What tailwinds and risks does Fisher watch for 2025 and 2026?

Evans notes that the first quarter of 2025 is almost over and asks about tailwinds. Fisher says there is nothing shocking: inflation trends are not going away, tariff news matters especially for companies that rely on the global supply chain, and geopolitical concerns are always a risk. He says he does not know which way interest rates will go, given conflicting reports, and that if rates rise it is good for credit and debt but default trends are a worry. Evans says the potential for economic turbulence involving big trade partners such as Mexico and Canada is real, that he thinks the table will be set, for better or worse, in 2025, and that people are looking for better balance.

How do Evans and Fisher see the democratization of alternatives?

Evans says he is as bullish as ever about alternatives. He says democratization is a massive opportunity not only for asset managers but for service providers, whether an audit firm, a fund administrator, or a fintech company, and that the alternatives market could be massive because of it. He notes that people can now pick hedge funds in a 401(k) plan, which is not where he and Fisher grew up, and says it is an exciting time for the industry and an enormous time for change. He says the question is whether investment managers can keep up and that the winners will be the ones that do.

Evans closes by thanking Fisher for his time and insights and for the partnership between Convergence and KPMG, which he says has made Convergence better. Fisher thanks him for having KPMG on.

Which figures did Evans and Fisher cite?

Figures stated in Episode 46, March 2025

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