Demand for hedge funds is declining, which is helping drive the transformation of the global alternative fund industry, according to a survey results from Ernst & Young Global Ltd. (EY) published Monday.

The EY 2018 Global Alternative Fund Survey finds that 20% of institutional investors are trimming their allocations to hedge funds, which demonstrates “a multi-year trend of slowing allocation appetite for hedge fund products,” EY says in a news release.

Instead, investors are turning to private equity (PE), with 34% of investors planning to increase their allocations to the sector. Only 9% of invesotrs expect to decrease their allocations to PE in the next three years.

Amid these shifts in investor appetite, investors are demanding more customized products and outcome-oriented solutions, EY says, and alternative asset managers are facing increased investor demand for more involvement in their investments.

“Alternative asset managers are grappling with a whirlwind of changes, and they can either act now to address industry disruptions — ranging from technological innovation to products and competition from new players — or admit defeat and lose competitive market share,” says Natalie Deak Jaros, global hedge fund services co-leader at EY, in a statement.

“In order for alternatives to stay ahead, they need to appease investor demand for customization, implement technology that augments investment decisions, and hire the proper talent to both manage technology and bring outside thinking to the traditional financial services mindset,” she adds.

Hedge funds making more use of artificial intelligence (AI) and alternative data, the survey finds, but private equity firms are less eager to embrace these sorts of innovations.

According to the survey, 29% of hedge fund managers are using AI, up from just 10% in 2017, and another 31% are studying the idea, up from 17% last year.

“Not only do managers clearly see the benefit of AI and alternative data in helping them gain a competitive edge, but investors are actively seeking out managers that are exploring new innovations to deliver alpha. Not long ago we were only talking about quantitative managers utilizing these techniques; however, we continue to see increased adoption and use cases across all strategies,” says Dave Racich, global hedge fund services co-leader at EY, in statement.

The global survey of alternative fund managers and institutional investors was carried out from July to September.