While the management stage of the investor relationship is all about earning trust and anticipating needs, the next stage—service—is where best-in-class firms truly differentiate themselves from the competition using an investor relations tool.
Instead of creating a more tactical management style, these savvy firms strategically position themselves to become less about “doing things right” and more about choosing the “right things to do” for their investors.
This approach boils down to everyone in the firm—not just the investor relations team—having a customer-centric perspective. Maintaining relationships is reactive; providing excellent customer service is far more proactive.
Top-tier firms understand this and seek out ways to use investor relations tools to provide added value to their investors through greater transparency, more co-investing opportunities, and impactful communications.
Enhance Relationships with Investor Relations Tools
In addition to honesty, follow-up, and delivering more than expected (the keys to earning and maintaining your investors’ trust), transparency around investments is more critical than ever.
Take, for example, events that took place in Saudi Arabia a few years ago. In the wake of an American journalist’s death, investors who were bought into portfolio companies doing business with Saudi Arabia were understandably asking about their exposure. Historically, not all investors report on each company within the portfolio, but the best practice is to highlight any key issues that might affect the portfolio’s investments.
Best-in-class firms reduce risk and exposure by keeping their investors abreast of any changes affecting the companies within their portfolios. General partners (GPs) who provide detailed company updates on what is going on with their investments provide the kind of service that leads to investors coming back to the firm during the next fundraising cycle.
Offer Co-Investment Opportunities
Co-investment opportunities are another way to grow your existing investor relationships. Co-investments bypass the standard fund by investing directly in a portfolio company. Technically, co-investments are a minority ownership stake with many co-investors already existing as limited partners (LPs).
Both LPs and GPs are actively seeking co-investments, according to a Preqin survey of fund managers and investors. That’s because:
- 80% of LPs have seen their co-investments outperform private equity funds
- 46% have seen their co-investments outperform by a margin of more than 5%
With co-investments, not only do LPs enjoy higher returns and get to invest directly into the company at a minority ownership level, they pay lower fees than when investing in a standard fund.
To stand out from your competition, use a purpose-built private equity CRM system to track which kinds of co-investing LPs are interested in and what your firm has already presented to them. When opportunities arise, you’ll be well-positioned to target investors who are more likely to be interested. And you can do so with great ease, since finding them in your database and connecting with them is simple.
Go Above and Beyond with An Investor Relations Tool
While investor relations teams routinely share capital and legal documents with stakeholders, this role calls for far more than transactional communication. Besides sending out a K1 every quarter and inviting investors to sit in on regular quarterly performance calls, you can provide additional value to them with newsletters, annual meetings, deal announcements, and opportunities to connect with other investors.
Staying engaged with your investors not only shows that you want them to be informed, but it also demonstrates that you’re proactively managing your investor relationship. Over time, this is what leads to repeat investments. When you enter the fundraising process again, you’ll be halfway to close if you’re managing relationships in this manner.
Best-in-class firms operating using a predictive approach are already adopting technology to share reports and fund information, and then track what the investors are doing with that information. Again, investor relations tools like Altvia can help you improve targeting and personalization in communications for a more impactful touch.
Investor Relations Tool: Enabling You to Connect With Stakeholders at the Optimal Times
What’s the secret to being well-positioned when the next fundraising opportunity arises?
It’s all about providing an outstanding LP experience to your existing investors. When you leverage the right investor relations tools to do that, they’ll want to do more deals with you.
As we’ve outlined above, if you’re as transparent as possible, tailor co-investing opportunities to LPs’ preferences, and use every chance to communicate added value, you’ll be providing the exceptional customer service that attracts and builds successful relationships with investors for years to come. If you’re looking for more guidance on ways to improve the investor experience, read our full guide below.