How Managers Access Consultants for Allocations

2021 was the most productive year ever for private equity funds, and the amount of demand was exceeded by 2 times. Last year was the strongest year in terms of fundraising in private market asset classes. The year 2022 is seen as a transformational year for private markets, hedge funds and digital assets.

At the recent Context 365 Miami conference, held in late January, a session moderated by our very own Stephen Mazzotti titled “How Managers Access Consultants for Allocations,” featured insights from the following panelists:

David Fann, Partner and Vice President, Aksia
Michael C. Wright, Senior Vice President, Segal Marco
Chris Shelby Jr., Director of Private Markets, Verus

Panelists shared their views on what they currently see in the market and their expectations for financial markets. Significant volatility, correction in public markets and overexposure of private equity are just some of the important topics discussed by the panelists.

The world and the market are changing very rapidly, and therefore the consultants closely monitor and factor into their capital market assumptions many variables, for example, the supply chain, GDP growth and rising interest rates. interest and inflation.

In addition to current private markets and hedge fund opportunities, panelists shared their views on the state of investments and capital allocations in digital assets. In the field of venture capital, with the development of different technologies, market capital has increased significantly, and managers and consultants are certainly gaining strength in these areas.

“It’s definitely something that we’re going to continue to focus on and understand where and when the right opportunities will arise,” Mr. Shelby said.

The panelists also discussed some of the views of fund managers and consultants in the market. The bifurcated market between those who are very sensitive to interest rates and those who have a longer term perspective will affect the opinions of consultants.

“Early/middle of last year, they started the rotation on the equity side, from large caps to mid and small caps, and from technology heavy sectors to some of the more value-oriented sectors,” Mr. .Wright.

The rotation from more traditional asset classes to private asset classes is expected to continue in 2022. Capital allocation will be more favorable to managers who have demonstrated their ability and skills to identify and create platform companies that are better when they left those investments. than when they were acquired. Unlike fund managers and consultants who worry about the cost of investments, the effects of inflation, rising interest rates, etc., their clients worry more about valuation in private markets.

The issue of how managers access consultants was actively debated. “Consultants, and it’s research, it’s consultants in the field, it’s anyone in the organization, it can be top or bottom, they need to know you exist” , Mr. Shelby said. “They need to have the conversation, they need to have a shared interest in the strategy, the business and the ideas, identifying that similarity. I think it’s very difficult. This can be very difficult to do, but having our conversations and making sure they are with everyone, not just the perceived decision makers, I think is a great first step that every manager should take to access it.

The panelists cannot stress enough how important ongoing interactions, ongoing dialogues, nurturing and developing this relationship over time is imperative. “Investors need to know you, investors need to like you and they need to trust you. Your story should be consistent,” Fann said. Given the competition and the number of managers in the market, nowadays it is increasingly difficult to obtain this capital, moving someone who is already in this position is usually very difficult. Mr Fann added: “So you have to be likeable, you have to be trustworthy and you have to have really phenomenal leaders” for the manager to be considered and the consultant to be able to speak. about them to his client.

A demand for co-investments from private equity, as well as private credit, was cited as one of the important elements in positioning the funds vis-à-vis potential recipients. Listening to clients, understanding funds, their asset classes, strategies, track record, uncovering weaknesses and strengths were also seen as important tactics to properly position funds and convey the right messages to potential recipients.

James V. Hayes