As SEC regulation around private fund advisers evolves and more investment managers become RIAs, limited partners (LPs) are gaining influence in capital deployment and firm strategy. LPs are insistent that investment managers recruit top tier Investor Relations (IR) and Business Development (BD) talent to bolster fundraising efforts and to institutionalize firms to meet stringent reporting demands. So, at the request of many LPs, who are investment firms recruiting for IR seats?
Drawing from our recent experience recruiting for firms such as Makena Capital and Quona Capital, we’ve found that the most successful IR and BD leaders have the following competencies and skills in common:
- They are process-oriented and strategic. They can comb through an up-to-date CRM to manage new and existing prospects, as well as have frequent, meaningful touch points with all investors to nurture relationships on an on-going basis. If there is no existing infrastructure in place, they can onboard and implement the software, tools, and third-party vendors to streamline internal processes.
- They are cross-functional powerhouses. IR and BD leaders partner with investments, finance, product, and operations to drive overall firm growth. They understand how to engage and communicate with different internal stakeholders to gather the portfolio and fund data they need to report to external entities and investors.
- They know public markets. For hedge funds it’s logical that IR/BD leaders should be fluent in public markets. Perhaps what is less obvious is to consider recruiting IR/BD talent from public markets for private equity and venture capital firms. In short: if they have been successful at an open-ended fund, they can likely crush a close-ended fundraising process. They also tend to have lengthier track records than their peers in private markets. Why? Hedge funds generally institutionalize before private equity and VC firms due to SEC regulations.
- They bring additive networks. Think of which LP relationships are strongest, and more importantly, which geographies and categories (E&F, pensions, corporates, etc.) could be developed. Find the leader who brings an LP base in areas that will improve the quality and diversity of your firm’s LP relationships.
- They listen. A top-notch Head of IR truly hears their LPs and feeds their input back to the firms to adjust products and fund structuring accordingly. For example, think of duration matching. If certain investors have an appetite for short-duration strategies, the firm may consider reducing time horizons. Or perhaps LPs desire a separate fund for an emerging markets strategy; an IR leader with a strong pulse on investors’ perspectives can ultimately feed this data back to the firm and drive overall investor satisfaction.
In addition to finding the rockstar who is process-oriented and strategic, can partner cross-functionally, knows public markets, and brings an additive network to your firm…
We find that the secret sauce is to find someone who you can actually delegate to. If you manage the day-to-day operations of a firm, your time is likely more effectively spent on investments and people management than on fundraising. Recruit an “athlete” who can carry the football (at least) two-thirds of the way down the field, and then hand it off to you for the close.
Having a point person responsible for LP management is critical for more than just efficiency; a point person also contributes to the likelihood that LPs will commit capital across multiple funds at multiple junctures in time. Today IR/BD teams spend years in the pre-marketing phase, where they are nurturing existing investor relationships and developing new ones. Ongoing relationship management ensures that once funds open, they can quickly close with a strong re-up rate from LPs. It’s cyclical – teams who are efficient both pre-market and post-close contribute to quicker and meatier future capital raises.
If you are hiring your firm’s first Investor Relations or Business Development leader, or thinking about bolstering your team’s bench, we would love to partner with you or share additional insights from our IR/BD search work.
To learn more about SPMB’s Investment practice — our team and our clients — visit us at www.spmb.com.
