ODD, Legal, Investor Relations, ESG Conferences Industry Color From Across The Globe – Fall 2022

Industry color from across the globe – Private Equity Legal, ODD, Investor Relations and Small & Emerging Manager Conferences

ESG: Every single conference touched on ESG / DEI as a topic. 

• What is working for GPs and asset managers? 
  1. Metrics, metrics and consistent metrics 
  2. Building diversity across the organization – gender, color, age, ethnicity, including diversity in thought (outspoken vs introvert)
  3. Proactively creating a program is a baseline requirement,then focus on continuous improvement. Investors are rewarding efforts over perfect answers.
  4. Building a responsive investor relations strategy to address diligence and ongoing reporting needs
     

• What’s not working?
  
  
  1. Putting diverse colleagues in senior roles to attract investors, with limited firmwide commitment to diversity in other positions
  2. Focus on diversity only during recruitment, and be unable to retain diverse employees
  3. Not being able to demonstrate compliance with broad ESG statements
  4. Trying to implement a program without technology – it’s hard to create goals and consistent measurements without technology
  5. Too many and too long DDQs from investors and LPs taking up resources. What used to be 10 questions a few years ago has grown to 40 pages.

Technology: Most conferences talking about the power of data – from data extraction to seamless data collection

• The power of data – super effective when managed properly but the proliferation of it can create more noise than good
• There may not be a perfect solution to match all your needs on day 1, but it’s important to act now and make progress
• Too many technology options create ambiguity in selection – focus on excellence, firms that demonstrate continuous success, and firms that demonstrate focus and sound business models which is critical in current market environment
• From asset manager’s perspective, there is a need for human engagement with technology because the next generation of investor and LP decision makers are engaged with tech tools

Operational and Legal Due Diligence: Focus on outsourcing, disclosures, technology, and fees

• As outsourcing trend continues, vendor due diligence and controls are in focus
• Regulation and disclaiming information will be key areas of focus and scrutiny, especially with new side letter restrictions and net/gross performance disclosures
• Overall, fees remain under pressure, although pass-through fee structures are being introduced, with one recent development expected at Brevan Howard
• Focus on background check and transparency is also extending to portfolio companies 

Fundraising: it’s never easy and it requires a strategy!

• Managers are leveraging social media to extend their brands, improving their investor responsiveness, as managers believe brand experience is becoming as important as a performance in current market conditions
• Style drift is out of fashion and managers are focusing on raising funds that match their core strengths
• Managers need to be proactive and strategic – finding investor fit early is key to success. Proactively creating quality due diligence materials, highlighting risk flags help build trust and show commitment. ESG responses cannot be N/A

Private Markets GPs

• Private markets GPs are seeing the denominator effect stall new allocations, especially for multi-asset investors
• Private Markets FoFs and fee earning LPs are more likely to still be allocating as per their mandate in current environment

Emerging and Diverse Managers

• First time find finding it very difficult as flows are going to established managers
• Emerging manager fundraising is up from 305 funds raised in 2011 to 639 funds raised un 2021, increase largely driven by Private Equity funds
• There are over 6000 funds in the emerging manager universe, and over 800 funds in the diverse manager universe
• Build LP trust with co-invest, prefund structures as an alternative to a comingled fund. To successfully co-invest, be in LP’s database early!

Do bookmark this blog… more updates coming from three more conferences in APAC, EMEA and NA.

Check out our spring takeaways

Would like to share your views, please get in touch!