Three ways that GPs raising Private Equity funds can stay strong in a soft economy

November 15, 2011 at 19:37 · Filed under Private Equity Fundraising

There’s a lot going on in the Private Equity universe to keep GPs raising capital up at night. The Eurozone crisis is still sending out shock waves and concerns remain for a double dip recession both at home and abroad. Regulatory changes and on-going liquidity issues with many, traditionally enthusiastic investors in the asset class are also a worry.

But in a slow moving economy Private Equity has a crucial role to play. So how can fund managers hold their nerve? We’ve identified three main ways fundraising firms can raise their game – improving insight, building resilience and maintaining momentum.

1. Improving insight

Make your investor information work harder. This may mean a full review of tools and resources to see what’s still working well and what’s not helpful anymore. These days fund managers need sophisticated insight to understand sophisticated investors. Getting a grip on really understanding your existing investor base should be a priority.  The breadth and depth of information you must understand covers: investor timing, the diversity of their existing portfolio, their market sentiment, the challenges they face, opportunities they seek, the threats they aim to avoid. Do you know what your investors really think of your team?

Check out what your current intelligence is telling you about what makes investors tick and how can you gain their attention.

Your insight should be able to help you easily map the investor journey throughout the fundraising process.  You need systems and processes to track the constant churn of people and where they have moved. If a key investor contact moves on, you need to know.  Communication is also vital to gain investors’ attention. Gone are the days when firms used to contact their investors only occasionally. In today’s increasingly digital world communication is almost incessant.

2. Building resilience

Getting on top of investor insight helps you more effectively manage a fund’s life cycle and helps build resilience into the business. A strong investor relations function means fund managers are building resilience into a rapidly changing environment.

Planning is another way to build resilience.  Make sure you have quality planning expertise in your senior team, don’t skimp on this resource. Good risk assessment and robust safety measures will see you through the best and worst case scenarios you may encounter out on the road.

The planning process will also help you assess existing resources including external advice and support. What do you need to buy in and what can be managed in-house? We live in a contingent world – staff resources can be deployed as and when required. Flexibility also builds resilience.

Investment in managing the logistics of road shows will really pay off.  Efficient administrative processes will mean you waste less time while travelling and can handle data and communications quickly. Resilience on the road means maintaining a sharp focus. What tools and processes do you have to evaluate success? How do you compensate quickly for investors that drop out or decline to participate in the process? How can you quickly re-tune your pitch to new audiences?

3. Maintaining momentum

Fundraising never stops. It’s not a stroll in the park, it’s an endurance test. Fund managers have to pace themselves and constantly re-evaluate their progress. Check you are familiar with the latest evaluation tools, techniques and thinking.  Be clear about how you can measure your ongoing progress.

Fund managers now need deeper and more fruitful relationships with investors. At the same time potential investors for future funds can be targeted and cultivated at an early stage. This is where maintaining momentum in the fundraising process comes in – it’s about making sure the investor relations function is stringent and ongoing.

Differentiation

Private Equity firms can use insight, resilience and momentum to improve operational infrastructure and differentiate in a competitive fundraising market.

Read more about Private Equity fundraising…

Three Ways that GPs raising Private Equity funds can stay strong in a soft economy

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