September 28, 2023 – As SEC regulation around private fund advisers evolves and more investment managers become registered investment advisors, 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?” asks Emily Wallach, client partner in the investment practice at SPMB Executive Search, in a new report.
Drawing from SPMB’s recent experience recruiting for firms such as Makena Capital and Quona Capital, the search firm says 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 touchpoints 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,” said Ms. Wallach.
- 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,” said the report.
- 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,” said SPMB. “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,” said SPMB. “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.”
“We find that the secret sauce is to find someone who you can actually delegate to,” said the report. “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.”
Emily Wallach is a client partner in SPMB’s investment practice. She joined the firm in 2021 to build out the investment practice alongside Suzanne Heske. Ms. Wallach partners with investment, operating, and leadership teams at venture capital firms, private equity firms, and hedge funds to recruit exceptional talent. She focuses on senior investor searches, as well as functional leadership searches for investor relations, business development, CFOs and GCs within investment managers.
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,” said Ms. Wallach. “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.”
For over 40 years, SPMB Executive Search has worked alongside its clients to build executive teams that ensure venture capital and private equity-backed game-changers achieve scale, and position multi-billion-dollar public companies to unlock innovation. Specializing in technology and innovation, SPMB recruits upper management and board members to growth-oriented companies in tech, consumer, and sustainability industries. SPMB has also placed dozens of senior executives at the portfolio companies of leading private equity firm partners including Blackstone, KKR, and TPG.
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media