Creating Momentum During a Time of Pause
Introduction:
Although many institutional investors may be “pencils down” for new investment managers in 2020, there is a unique opportunity for managers to not only focus on important asset and portfolio management initiatives but also internal efforts during this time. Many investors categorize themselves as “transaction-ready.” For most investors, existing relationships will take priority, but there is a clear path to create momentum with investors and consultants during this time of pause and self-reflection.
Alliance Global Advisors believes this is a critical time for managers to refine action-oriented, near-term and long-term goals, ultimately elevating the limited partner experience when marketing to the investor base. Alliance surveyed the institutional consultant community and several limited partners to produce relevant feedback during this ever-changing due diligence environment. During our conversations, it became clear that investment managers should not hesitate to engage with investors and consultants. The investors are ultimately looking for refined partners who have taken time to reflect, adapt and add value during this time of constant change.
Creating Awareness/Preparing for the First Conversation or Meeting:
Many managers miss the mark when trying to establish awareness and credibility with investors and consultants. Managers should be prepared to address the following questions:
What is your “special sauce” or differentiation?
Does relevant third-party data back your strategy?
Can you speak to your target markets and recent transactions to reinforce expertise?
How do you derive value that is unique from your competitors?
How are you reinvesting in your people and platform?
Who are your competitors? Can you clearly articulate how your strategy compares?
Can you articulate where you would like to be in the future and how you plan on getting there?
How are you exceeding the needs of your current client base?
Did you research your audience to understand pain points, and can you show them how your strategy adds value to their platform?
Presentation Best Practices:
Have the pitch rehearsed and refined. More than one team member should be presenting the information, but make sure all team members stay engaged throughout the conversation.
Many participants (over four) on a conference video call can be cumbersome. Only include the relevant participants.
Create an agenda for the call and ideally send it to the participant for feedback prior to the call. This preparation ensures all their points will be covered.
Pause multiple times during the conversation to allow the participants to ask questions (especially during Zoom calls).
Include relevant Investment Committee memos and case studies (review case study bullets below).
Complete a data room in advance of the presentation and have due diligence questionnaire answers completed. This will ensure the due diligence process will go smoothly.
Include clear and concise track record information - understand all the components of your returns and how details of the execution supported those returns.
Understand the individual break up/components of the returns.
Know how your execution emphasized your returns and how it added value to each component of the return.
Show the progress - Include the imperfect properties and how you intend to make them better.
Explain how you applied or adjusted your strategy appropriately to showcase the flexible capabilities of your firm.
Focus on geographic deployment strategy - Why do you invest in certain areas, and where do you plan to invest in the future? Create a data-driven footprint.
Be prepared to answer detailed questions, referencing both quantitative and qualitative information.
Answer all the questions or be honest if it is truly information that cannot be disclosed.
Promote intellectual honesty. Flag questionable due diligence items upfront to not lose trust throughout the process.
Case studies should include three items:
Transaction Statistics
Acquisition Date
Acquisition Metrics
Capital Expenditure
Disposition Date (if available)
Disposition Metrics (if available)
Method of Sourcing (i.e. sourced from a distressed seller, sourced due to a unique relationship between the buyer/seller)
Building Accreditations (LEED GOLD, BREEAM)
Investment Thesis
Why this location/asset, what customer, what deficiency or dislocation did you identify?
Execution
How did you create value for your investors? Did you take rents to market, attract new tenants, add an element of ESG (Environmental, Social, Governance), improve the market positioning, terminate the prior property management firm, uncover cost savings?
What Not to Do:
Don’t only pride yourself on proprietary deal flow.
Don’t pitch the same generic general partner pitch all limited partners have heard. Differentiate your investment strategy from your peer group.
Don’t give a brochure showcasing only your perfect properties with the highest IRRs.
Don’t only tell the success stories.
Don’t introduce your platform with unfinished, unprofessional materials.
Don’t overwhelm limited partners with communication. Keep in mind; you are trying to build a long-term relationship.
Don’t pile up a bunch of whitepapers explaining how rosy everything is.
Don’t speak negatively about your peer group.
Feedback Specific to Emerging Managers:
Understand a strong team on paper does not always equate to success. Teams with a track record are easier to pitch than teams with no prior tenure.
Analyze performance and articulate successes and failures. Be able to attribute market/sector performance versus asset selection.
Walk through your team’s experience and qualifications. Be prepared to discuss why your team is more qualified than others.
Be able to answer questions about why the team or individual branched out from previous jobs.
Always showcase proprietary technology or systems as they are usually rare and exciting.
Keeping Up the Momentum:
Create meaningful conversations with investors.
Use the investor’s time wisely. Be concise and articulate how you plan to execute your strategy.
Be patient. Do not expect an immediate response from the investors and consultants. Portfolio management will take priority over new due diligence.
Take the extra time to organize materials, strategy and presentations and then get back on the phones/video calls.
What technologies can be used to create a stronger experience for the investor and consultant?
Send initial pitch books that show why you are unique and deserve a call.
Take this time to study the limited partners and create a short, personal pitch specific to each investor. Show each investor the immediate value you can provide and use it to break the ice in initial conversations.
Conclusion:
For the most part, limited partners are focused on exploring new opportunities with existing managers. Still, there is a clear interest in beginning conversations with new managers, especially those with strong operating platforms and locational expertise. The current environment creates an opportunity for managers to take the time to “sharpen pencils” while repositioning their strategy and organization to create a best in class platform that will stand out among their peer group. It is those organizations that will gain the trust of the limited partner base right out of the gate and will be the first to gain the next institutional allocation. Alliance Global Advisors is here to help lead the conversation and provide guidance on incorporating “industry best practices” during this unprecedented time.
About Alliance Global Advisors:
Alliance Global Advisors is a women-owned consulting firm focused on empowering the institutional investment community to elevate best practices. Advising clients with over $65 billion in assets under management, Alliance partners with organizations to provide an independent perspective and innovative approach to critical strategic initiatives. Our partnerships allow senior management teams to focus on what matters most: diligently managing client capital, creating value and delivering exceptional returns in a performance-driven market.
Disclaimer: This blog was originally published on July 15, 2020 and will be updated periodically to reflect changes in the industry. The content may contain or cite personal and/or professional opinions that differ from the views of Alliance Global Advisors.