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Best Practices for Private Equity Investor Relations Professionals in 2022

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 that private equity investor relations professionals can use to maximize their chances of an efficient and successful fundraise.

1. Focus in and do research on target LPs

While the logistics of private markets fundraising are slowly returning to normal, many challenges remain for capital raising fund managers. Fundraising cycles have shortened and some institutional investors find themselves with limited time and portfolio capacity for new manager relationships as they work through due diligence for re-ups to their existing managers.

Fund managers must ensure they are focusing their finite time and resources on the investors who have the highest chance of committing to their funds.

Fund managers must ask and answer these key questions to identify the right LPs their target lists:

What is their pacing plan and typical “bitesize”?

  • Knowledge of an institutional investor’s average commitment amount or “bitesize” and the number of commitments they are targeting in a given fiscal year is critical. If the investor’s average bitesize is misaligned with what the fund manager hopes to raise from each LP, the fund manager immediately knows that the investor is not the right fit.
  • If an institutional investor is targeting a small number of commitments in a year with several re-ups planned, a fund manager may choose to not pursue this LP because of the significant competition they might face for those limited slots.
  • Due to disclosure laws governing public pension plans, fund managers can source this information through the asset allocation and strategic plans that are published on government websites or through Freedom of Information Act (FOIA) requests – however, some plans make these easier than others to find. Accessing the actual documents is valuable as it gives further context.

Who have they recently committed to?

  • Knowing an investor’s current manager roster and who they have committed to in previous vintage years can give fund managers insight into how their fund might fit into the investor’s portfolio.
  • Has the investor recently committed to similar strategies? Is the fund manager’s strategy relatively unique compared to the current roster? The answers to these questions can give fund managers the better context when developing their unique value proposition to the investor.
  • Quarterly portfolio reviews produced by investment consultants for their public plan clients can be valuable resources for answering these questions.

Bonus content #1: Nasdaq Private Fund Trends Report 21/22

In this report we explore top private markets themes from 2021, pension plan commitment activity from across the private markets, and the top GPs and LP allocators.

2. Tailor the Pitch

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

Delivering a presentation that focuses on the points that are most relevant to that specific investor is 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.

Fund managers targeting U.S., U.K., and Canadian public plans, can find information about specific portfolio needs in the investment recommendations submitted by investment teams to their executive boards or investment committees. However, unlike asset allocation and strategic plans, these documents are not readily accessible through plan websites, they are generally accessible through FOIA requests. Nasdaq eVestment’s Market Lens 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 for fund managers seeking to tailor their pitch decks to the investor’s needs.

For example, an investor who has demonstrated a strong preference for capital preservation in previous investment recommendations will likely be interested in seeing loss ratio data and risk management or mitigation strategies highlighted in a prospective fund manager’s pitch deck.

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 Inward

Investor due diligence on prospective fund managers has become more sophisticated and data-driven than ever before. To contend with this scrutiny, fund managers must view their track records through the same lens as potential investors and be prepared for any question.

Managers must ensure that they can support their stated key strengths with data and be prepared to answer tough questions about any deficiencies or blemishes in past performance.

A robust private equity portfolio intelligence tool is key to making this inward analysis as efficient and effective as possible. Fund managers should avoid wasting time on complex spreadsheet models to produce analysis, and focus on more high-value and high-impact activities to progress their fundraising efforts.

Bonus content #3: Fundraising Intelligence Pack

The Nasdaq eVestment platform tracks investors’ asset allocation weightings and details on funds coming to market. Request an intel pack to get a list of 5 under-allocated LPs and insights on GP competitors coming to market.

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?

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