Understanding the consultant landscape in the private markets

by Andrés Ramos, Content Marketing Specialist – eVestment Private Markets

The gatekeepers of institutional capital

Working with investment consultants undoubtedly adds an extra layer of time and effort to the fundraising process for fund managers, but the fact remains that winning the approval of these gatekeepers is key to cultivating relationships with many of the top institutional investors in the market.

While public pension plans are some of the largest allocators to private markets, and many have dedicated investment staff to direct allocations, they are often small teams that lack the resources to plan, diligence, select, and monitor a full private markets commitment strategy.  As such, consultants are employed to assist in a varying number of roles – depending on the plan – and often employed as a governance requirement to ensure fair and unbiased decisions.

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For fund managers this means that winning a new commitment from a pension plan sometimes means closing the deal twice: once with the client and a second time with the consultant. In the context of a single commitment, this added layer of diligence would appear to be a burden to fund managers, but when considering how many clients consultants have, the potential for additional positive recommendations to their client base makes the process well worth the time spent.

Understanding the consultant landscape

The challenge for many fund managers can be navigating the consultant landscape and understanding key questions like “who are the most influential in the industry?” and “who are specialists in the strategies my firm manages?”

In the year-end edition of the eVestment Private Markets Monthly Monitor we tracked the number of commitments where a consultant made an investment recommendation or advised an LP on their decision. This analysis helped create a clear picture of who the most active consultants are within the public pension plan segment of the LP market.

All private markets strategies

Across all private markets strategies, Hamilton Lane was the most active consultant in the year to the public pension plans we track, advising on over $10.3 billion in new commitments from this investor group.

Meketa Investment Group and Cambridge Associates followed with nearly $6.5 billion each in commitments advised. StepStone Group and Aksia rounded out the top 5 with $4.4 billion and $2.7 billion in reported commitments advised, respectively.

It is worth noting that these figures only represent public pension plans’ commitments reported to private markets funds and are not representative of all the client types that the consultants serve, nor the full scope of the recommendations they make to other asset classes.

Private Equity

When looking exclusively at private equity commitments, Hamilton Lane again takes top spot having advised on over 80 reported commitments from pension plans in 2020. The consultant’s most active private equity clients in 2020 included Washington State Investment Board, Pennsylvania Public Schools, and Hawaii ERS.

Meketa, consultant for industry titan CalPERS, followed suit and claimed second spot in the year.

Fund managers interested in working with New York-based pension plans should target StepStone in their next fundraising cycle. The consultant advised on commitments from NYCERS, NYC Police, and NYC Fire in 2020.

Rounding out the top 5 within private equity was Aksia, who advised on 14 commitments totaling $355 million for Los Angeles City ERS, among others. The consultant also counts Illinois SURS and New Jersey Division of Investment among its clients.

Private Debt

Despite their reputation as a leading consultant for endowments and foundations, Cambridge Associates is also a go-to consultant for public pensions. The Boston-based firm was the most active consultant to public pensions in terms of private debt commitments advised in 2020. Most notably, Cambridge Associates advised on 18 commitments for pension plan heavyweight Florida SBA.

Hamilton Lane finished the year strongly as well in second place. Most notable among the consultant’s private debt recommendations in the year was $500 million in reported commitments advised for Louisiana Teachers. Coming in at number four in private debt for 2020 was NEPC. The consultant advised on over 20 reported commitments from clients including Baltimore City Fire & Police, Boston Retirement System, and Ventura County ERA.

Consultant insights, LP activity, and more

The Monthly Monitor is your source for the most current activity from public pension plan investors in the private markets. Each month the Monitor delivers insights on how LPs are allocating to private asset classes, where consultants are focusing their attention, and which GPs are closing commitments.
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