The genesis of a new fund is not without its challenges; key amongst them for the Investor Relations (IR) team is to ensure that information is provided to prospective LPs in a quick and transparent manner.
LPs not only demand more, but in greater detail…
As Private Equity has consolidated and matured, so too to has the sophistication of LPs – and their information requests. Undertaking enhanced due diligence on the management team, their track record and operational processes with minute scrutiny is now the new normal.
During a roadshow, Investor Relations are under a lot of pressure to ensure that queries from LPs are responded to in a professional manner. A system such as Baxon´s would clearly benefit IR teams, by ensuring that critical information, such as the latest financial and operating KPIs of existing portfolio companies is readily on hand.
Having a self-service system to provide these measures is in itself a key differentiator for a firm raising a new fund and will be looked upon favourably by LPs. New LPs especially will take a lot of comfort in that their assets will be proactively managed.
…and more often!
A typical fund can take anywhere between 12 and 18 months to close after initiation. During this time fund managers are keen to expedite the process, and ensure that it runs as efficiently as possible while timing it to coincide with a landmark investment to kick-start the fund and avail the PR involved in consummating the transaction.
During this time IR teams will meet several times with prospective LPs, constantly keeping them updated on progress. Even when the fund is closed, IR teams need to remain proactive and close to LPs once they have invested. Being able to respond quickly and consistently to information requests from LPs is a great start.
What are Investors looking for?
Interestingly, in a recent investor survey conducted by Preqin, superior return history ranked third among the characteristics that identify a superior fund manager:
On reflection, what investors sought above all was an experienced management team, and operational excellence. One can conclude that making a wise decision by choosing an operating partner with robust and flexible systems and processes is an essential requisite to generating superior returns!
In an increasingly competitive marketplace, having a system for collecting, aggregating and disseminating data lets you stand out from the crowd.