Like it or not, Limited Partners want more transparency from their managers. According to Preqin’s recent Investor Outlook for Alternative Assets report, Private Equity Investors rank transparency as their third top key issue, behind only Regulation (1) and Fees (2).
The increasing investor appetite for the asset class is well documented, so this demand for transparency can’t be ignored. Let’s take a minute to think about why this is the case and what it means.
According to the Forbes billionaire list, the number of extremely wealthy individuals in the world is growing at a record pace. It’s no coincidence, then, that Family Offices are among the fastest growing Investor category for Private Equity. I may not be going out on a limb here, but let me assume those two are correlated. If I’m right, wealthy individuals are ‘institutionalizing’ their wealth, hiring professional investment managers to invest their money, and those family offices are looking to alternative assets for outsized returns.
At the same time, institutional investors are back on the mend post-bubble, with many of them (28%) expecting to grow their investment teams over the next two years, and expecting to increase their allocations to the asset class.
So what does it all mean? Increased institutionalization, the result of 1) the increased sophistication of personal wealth turning to family offices, and 2) a number of new faces at institutional limited partners working on diligence activities. But don’t skim over the ‘new faces’ part; remember that while there are more individuals working on finding the right commitments to make, some of these new faces are simply replacements for those who were embarrassed during the bubble.
What would you do if you took over for somebody who was embarrassed? I’m not ashamed to say I’d probably be more careful about the commitments I make, and accordingly scrutinize my manager roster with a new-found emphasis.
And it’s clear to me that Investors are, too, now placing transparency at the top of their issue list.
We’ve spent the last two years focused on building software products that help managers be more transparent with investors. Often times there is a strong desire to be more transparent, but it can be overwhelming to know where to start, and to find the time to actually do something about it. And with that, we’ve built products that dramatically cut the time it takes to service your investors, and which focus on providing investors not only with the transparency they seek but that do so via a pleasant, elegant experience. Then everybody wins–investors get more of what they want and managers spend a fraction of the time providing it to them.
If nobody’s winning in your relationship, we’re here to help.