This is the third of a four-part blog series for private markets investor relations professionals, exploring how to find and utilize various key sources of information on the private equity market, US public plan investors and other fund managers to help accelerate fundraising and improve investor communications. Find part one, “Understanding the Market” here and part two “Investor/Fund Fit” here.
Meeting Investor Expectations
Many private fund managers can involuntarily fall into the trap of preparing a standard set of pitch decks and materials for all of their individual LP meetings: basing it on what they want to show and not on what the LP wants to see.
While GPs should be consistent in highlighting their own unique strengths and skillsets, tailoring elements of a pitch based on the LP goes a long way in helping win them over. Information on some of the institutional investor community can be relatively opaque but a wealth of information exists on public plan LPs, which are a prolific group of private markets investors. Through interactions with our GP clients of eVestment Private Markets Intelligence solution, we see GPs who are successfully raising capital from this cohort are leveraging granular information to personalize and tailor their pitches, setting a precedence for others looking to raise capital from the public plan market.
One of the most effective ways to ensure a personalized presentation for an LP is to build your pitch decks while keeping the question in mind: “what do they look for?” – what is their market outlook, what is their due diligence process, and what do they perceive as key strengths, and key risks, in private equity fund managers?
This information is readily available for public plan LPs through documents and resources that many GPs aren’t aware are publicly available and accessible: Consultant Research and Investment Recommendations.
Leveraging Consultant Research and Reports
The level of involvement that Investment Consultants play in public plan LPs’ private markets programs varies – from full fiduciary responsibility, to independent research and advisory. Understanding the level of involvement of a consultant with a public plan is a crucial first step to tailoring your pitches.
Board minutes and investment policy statements (IPS) are valuable documents to give a clear outline of the consultant’s position, as shown in figure 1. From here, you know how important the view of the consultant is on influencing commitment decisions.
(Figure 1. Washington State Board of Investment, Investment Policy Statement. Sourced through eVestment Private Markets)
For public plan investors that do use consultants, diving into the consultant-authored research pieces is a key next step. These are produced for, and submitted to. public plan clients and therefore readily available through market intelligence platforms. As outlined in figure 2., these give valuable insights into what the consultant “house view” is – how they view market opportunities and how they are advising their clients to navigate the market. Reading these documents ahead of pitches gives you the opportunity to prepare answers on how you will mitigate or tackle the challenges that are top of mind for your prospective investors.
(Figure 2. NEPC Private Equity Market Outlook. Sourced through eVestment Private Markets)
Not only does this information help you tailor your pitches to a specific plan, it can help greatly across your wider investor relations and fundraising efforts by giving up-to-date intel on market sentiment.
Investor and Competitor Intel through Investment Recommendations
Consultant research gives a general view of the market, but gaining an understanding of the idiosyncrasies of specific investors is imperative for a truly personalised presentation.
Before a commitment is made, Investment Staff at public plans will submit investment recommendations to the Investment Committee or Investment Board. These detailed documents are incredibly insightful in understanding exactly why a commitment was made to a specific fund manager.
Investment recommendations contain details of the proposed commitment size, the fund manager and a due diligence report: authored by Staff or the Consultant depending on the relationship. As such, these documents outline what were identified as key strengths that led to the commitment and, as importantly, risks that were identified and why they are mitigated.
This serves as both competitor intelligence and provides insight into the decision-making process of the LP – how they weight various factors as strengths and risks.
By seeing how the investor or consultant describes strengths and risks of a manager, and why they were mitigated, it enables you to help amend your pitch if these same factors are impacting your track record.
(Figure 3. GP Evaluation & Investment Recommendation. Sourced through eVestment Private Markets – redacted by eVestment)
The next step: Flipping the due diligence lens
An increasingly prominent feature of the investor and consultant investment recommendations are analytical charts. The charts and metrics chosen to be included provides you with another level of understanding of what the LP or consultant values. Like the key strengths and risks included in the memos, this is incredibly important to take into account because you don’t want to go in and present data that doesn’t have what they deem to be a critical piece of analysis.
Look out for our fourth and final blog that explores some of the most common metrics and analysis used by investors, and best practices for flipping the due diligence lens on yourself. Subscribe to our blog to ensure you don’t miss it.
Alternatively, watch our on-demand webinar now to find out more about fundraising success through deeper market intelligence.
Webinar: Finding Fundraising Success
Explore how private markets investor relations and fundraising professionals can source and leverage more timely and granular market, peer and firm intelligence to accelerate fundraising and enhance investor communications.
Topics covered include:
- Where to find granular and actionable insights on U.S. public plans’ commitment pacing plans.
- How to find out why specific GPs and their funds have been recommended by consultants.
- The key questions to ask to ensure better investor targeting, and where to find the answers.
- Best practices in leveraging your track record to win over investors.