March 22nd, 2018
In early March, private markets professionals joined eVestment in New York and Chicago for our private markets fundraising workshops. These brief sessions explored new eVestment research findings on investor and consultants’ due diligence practices, and offered practical advice on locating and utilizing sources of market intelligence to overcome challenges and capitalize on opportunities in GP’s fundraising and IR.
For those that couldn’t make the events, the following blog provides a recap of some of the key takeaways, including an overview of seven questions you need to know the answer to before launching a fundraiser.
Key Takeaway: Fail to prepare, prepare to fail
After some coffee and networking, our events began with a brief overview of key findings from eVestment’s 2018 Private Markets Due Diligence Survey.
The session highlighted that private equity remains an attractive asset class for investors, especially US Public Plans who in 2017 made over a third of their total commitments across asset classes to private equity. However, even with this, investors are still running stringent due diligence processes and placing a high-level of scrutiny on manager’s past performance and future strategy: nearly 80% of GPs surveyed by eVestment stated that investors are demanding increasingly granular performance data compared to previous fundraises.
For GPs hitting the fundraising trail, ensuring an efficient process is in place to respond to investors’ data requests will be key to ensure this does not detract resources from other important, high value aspects of fundraising, especially as 72% of GPs surveyed said investor data requests followed no standardized template.
What’s more is that developing a deeper understanding of your own track record is also imperative to not be caught off guard by LPs who are digging into your past performance – 74% of LPs surveyed recalculate a GP’s performance more often than not and so will have a full understanding of the drivers of value.
Key Takeaway: Flip the due diligence tables for more effective fundraising
While there is a wall of demand out there, the market is also becoming increasingly competitive: mega buyout funds are soaking up increasing amounts of capital at the same as LPs are keen to consolidate their number of manager relationships.
To ensure you’re giving you and your firm the best chances of hitting a final close as smoothly as possible, having a laser focus on only speaking to the right investors is critical.
To do so, before launching a “campaign” you need to do your research and identify investors with the highest chance of making a re-up or new commitment.
While just one investor type, public plans will most likely make up a proportion of your base. And due to regulation, they are required to make documents and materials public. The documents here host a wealth of information on a variety of key data points to understand if the investor will be a fit for your next fundraise. They also provide timely insight into the trends and processes permeating the wider LP community.
However, keep in mind that not all publicly disclosable information is disclosed publicly. It requires resource to identify, submit and stay on top of FOIA requests to get it. eVestment Private Markets sources and aggregates these documents from UK, US and Canadian public plans into a searchable database to give access to a wide range of documents more efficiently.
Key Takeaway: Seven Key Questions to Ask Before Fundraising
Here are seven key questions to ask, and where to find the answers, to determine if a public plan will be a fit in your next fundraise and what you need to show to win their commitment:
Q1. Who is in their current portfolio and what is their bitesize?
Find it in their investment consultants’ quarterly portfolio reviews.
Q2. Who have they recently committed to?
Find it in their investment consultants’ quarterly portfolio reviews and recent investment recommendations.
Q3. What is their commitment process?
Scan board meeting minutes, investment recommendations, and prospect evaluations to see their process and understand who the decision makers are.
Q4. Why have recent commitments been made?
Look at recent investment recommendations to understand what resonated with investors in their recent commitments.
Q5. How are your peers presenting their strengths?
Dive into your peers’ pitch books and presentations to understand how other GPs are pitching themselves to win commitments, and find out how have they differentiated themselves.
Q6. What metrics are important?
Look into prospect evaluations by investors and consultants to see how they quantitatively analyze GPs.
Q7. What is their due diligence process?
Portfolio reviews and strategic plans provide coverage of what comprises each stage of their due diligence process.