Best Practices for Private Equity Investor Relations Professionals in 2021

As a leading source of data and analytics for the private markets industry, Nasdaq Private Fund Solutions works with hundreds of GPs and LPs during their respective fundraising and fund investing processes. In doing so, we gain a unique perspective on both sides of the equation, and in today’s volatile fundraising environment, this insight is more important than ever.

We’ve distilled some of these insights into three best practices for private equity investor relations professionals to maximize their chances of an efficient and successful fundraise.

1. Focus in and do your research on target LPs

The current virtual fundraising environment has made the difficult task of fundraising from institutional investors even more challenging. Without spending the required time conducting thorough research on investors, fund managers risk wasting time with prospective LPs that have little chance of committing. Sophisticated fundraisers must ensure they are focusing their finite time and resource on investors who have the highest chance of committing.

Ask and answer these key questions to identify the right LPs for your fundraising target list:

What is their pacing plan and typical bitesize?

  • Knowing how much an investor is planning to invest in a given fiscal year is critical. This will tell you how many commitment “slots” they have available and for what asset classes and sub-asset classes.
  • Due to public plans’ disclosure laws, this information can be sourced through the Asset Allocation and Strategic Plans published on websites or through FOIA requests – however, some plans make these easier than others to find. Accessing the actual documents is valuable as it gives further context.
  • Awareness of the investor’s typical bitesize (how much, on average, they commit to a fund) also gives you confirmation on whether your fund is a fit. If you’re raising a $500m fund and the investor is seeking to make $70-100m commitments, this will likely be too great an exposure to a single fund for the investor and consequently a harder commitment for you to close.

Who have they recently committed to?

  • Knowing the investor’s current manager roster and who they committed to in the preceding quarters gives you insight into how your fund would fit into their portfolio construction. Have they recently committed to similar strategies? Is yours relatively unique? Knowing these answers gives you better context and information to construct your value proposition to that investor.

Investment Consultants produce quarterly portfolio reviews for their public plan clients. These documents can be valuable resources for answering these questions.

Bonus content #1: Adapting to Digital Due Diligence

2. Tailor Your Pitch

A common frustration for investors is hearing a generic pitch and receiving a presentation deck that has not been tailored to their needs.

Delivering presentations that focus on the points that are most relevant to the specific investor are key to gaining their attention and closing a commitment. Tailored pitches demonstrate thoughtfulness, attention to detail, and an understanding of the investor’s portfolio needs.

If you’re targeting U.S., U.K., and Canadian public plans, information about specific portfolio needs can be found through the Investment Recommendations submitted to boards and committees. However, unlike Asset Allocation and Strategic Plans, these documents are not readily accessible through plan websites, but mainly through Freedom of Information Act (FOIA) requests. eVestment Private Markets’ Market Lens product collates and organizes these document types and more from over 475 public plans into a one-stop research platform.

Investment Recommendations give valuable insight into the key strengths an investor has identified in a manager’s pitch, as well as the key risks of the strategy and the accepted mitigants. Obtaining this information is invaluable prior to an investor pitch as it allows you to leverage this information and tailor your pitch.

For example, if you know the investor has a strong preference for capital preservation and has highlighted it as a strength in other managers, you can expect that including data and wording around this would be well received by the investor. Calculating and highlighting your loss ratio would be a powerful tactic to evidence your claims.

Bonus content #2: The Art & Science of Private Equity Firm Differentiation

Read the report to see how we used AI and natural language processing to understand differentiation based on word choice in 150+ buyout fund presentations.

3. Turn the Due Diligence Lens on Yourself

Investors’ due diligence on your fund is going to be more sophisticated and data-driven than ever. eVestment’s 2019 Private Markets Due Diligence Survey found that LPs are increasingly focused on quantitative analysis of prospective fund managers. Over two thirds of investors indicated that Loss Ratios were very important to due diligence, and 43% rated Public Market Equivalent (PME) Analysis as very important.

Viewing your track record with the same lens as an investor is imperative so that you are prepared for any quantitative question. You need to ensure that you can support your key strengths with data and be ready with answers to potentially tough questions about any deficiencies or blemishes in your past performance.

A robust private equity performance analytics tool and process is key to making this efficient and effective as possible. Your time shouldn’t be spent manipulating spreadsheet models to produce analysis, but on more high-value and high-impact activities to progress your fundraising efforts.

Bonus content #3: How TopQ drives operational excellence and success for firms in the private markets

Looking for more Private Markets Insights?

Nasdaq Private Fund Solutions offers a market intelligence and performance analytics solution that helps investors, consultants and fund managers more efficiently answer questions critical to their business, such as:

  • Which North American and U.K. public pensions are planning commitments to fund strategies relevant to me?
  • How is the research of leading investment consultants shaping LP due diligence and fund selection?
  • How does a GP track record compare to returns from the Russell 3000?
  • How are fund managers pitching to investors and consultants? What is being well received?
  • Has a fund’s value creation been driven through market timing or operational improvements?
  • How would a private market portfolio’s returns be impacted by a decline in valuations?

Recent news and content

Get started with eVestment Private Markets