by Andrés Ramos, Content Marketing Specialist – Nasdaq Private Fund Solutions
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.
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?”
As part of our Nasdaq Private Fund Trends Report 21/22 we analyzed 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 $6.2 billion in new commitments from this investor group in 2021.
NEPC and Albourne followed with nearly $4.8 billion and $4.5 billion in reported commitments advised respectively. Rounded out the top 5 were StepStone ($4.2 billion) and Meketa ($3.8 billion)
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.
When looking exclusively at private equity commitments, Albourne took top spot with their $4.2 billion in commitments advised. Interestingly, this figure represented just seven commitments, all made by Washington State Investment Board. In terms of total recommendation made, Hamilton Lane led the way with 54 commitments advised totaling $3.2 billion. In total the consultant made recommendations to 35 different private equity managers. Pension plans working with Hamilton Lane included Connecticut Retirement, Hawaii ERS, and Santa Barbara County ERS.
NEPC had the greatest number of LPs advised of any consultant in the top five private equity consultants with fourteen pension plans. The consultant advised on commitments from several Maryland-based pension plans including Baltimore County ERS, Baltimore City Fire & Police, and Howard County.
|Rank||Private Equity Consultant|
Rounding out the top 5 within private equity was Meketa, who advised on 29 commitments totaling $1.8 billion.
After Albourne, Cambridge Associates had the largest average commitments size of any private equity consultant in 2021. Pension plans’ reported commitments that were recommended by Cambridge Associates averaged $88 million in size.
Hamilton Lane topped the pack for private credit consultant in 2021 with 18 commitments recommended to public pension plans totaling $1.8 billion. More than half of these commitments were made by Louisiana Teachers.
Wilshire was the only other consultant with over $1.0 billion in commitments advised, finishing 2021 at $1.2 billion. The consultant made ten recommendations to ten different fund managers including Ares, KKR and Raven Capital.
In terms of number of recommendations made, NEPC took pole position with 27 commitment recommendation for public plans in the year. The consultant advised on multiple private debt commitments for plans including Chicago Police, San Antonio Fire & Police, and Ventura County ERA.
|Rank||Private Debt Consultant|
Rounding out the top five in private debt was RVK with ten recommendations totaling $830 million. The consultant recommended three commitments each to North Dakota University and School Lands and Vermont Pension.