Written by PER’s Research Consultant Hafsah Bhatti
If you’re considering a career in private equity or private markets, you’re probably thinking about a position in the investment team. This is particularly true if you’re coming from a traditional banking, corporate finance or strategy consulting background. You may not know that there is a technical and varied career opportunity available within private market funds outside of the deal team, which offers great choice and a new way to apply your technical, commercial and soft skills: investor relations.
What is Investor Relations?
Investor relations is an umbrella term that incorporates all aspects of relationship management with existing and prospective investors (the LPs). It’s a crucial function in the fund (the GP). Simply put – if capital isn’t raised, it can’t be deployed. Over the last few years there has been a shift in the composition of IR teams, away from communications based backgrounds towards mirroring the investment team in skill set and calibre.
The work can be highly technical as sophisticated institutional investors demand detailed information (RFPs) about the value in the portfolio, including individual and aggregate portfolio performance data, tracking their return on investment as well as real time information on live deals. An IR professional must therefore have a deep and commercial understanding of core business drivers and the ability to model the impact on fund performance. They keep clients informed through answering ad hoc queries, producing quarterly updates, annual general meetings (AGMs) and press releases.
Before a new investment vehicle is launched, it’s necessary to have a detailed plan in place that outlines which investors you’ll approach, when you’ll approach them and how you will interact with them. This plays a significant part in ensuring a successful fundraise. It involves in-depth client due diligence (DDQs) to determine who to prioritise and to produce bespoke pitch books and presentations that focus on the investors’ needs.
As you become more experienced in IR, your function may shift towards coordinating IR mandates, fundraising strategy or directly engaging with current and prospective investors. Eventually, you may begin to take ownership of relationships or have overall responsibility for completing the fundraising.
Why do it?
There are many reasons why investment grade professionals are becoming increasingly drawn towards investor relations:
• The role tends to suit those with a technical skill set who enjoy variety in their working day, communicating with a wide range of people and eloquently articulating a compelling investment thesis for the Limited Partners.
• Like the investment team, it’s a good opportunity to get close to portfolio companies. You’ll develop a deep understanding of these businesses and stick with them through the lifecycle of the fund.
• Raising capital is a stimulating challenge and it is a big achievement to be part of a successful fundraise.
• You will have greater choice of lifestyle depending on the fundraising schedule and your responsibilities in IR.
• Compensation is competitive. In many funds, IR professionals are included in carry schemes, bonuses and other long-term incentives. Some funds match their IR salaries with their investment teams.
What about placement agents?
Placement agents are an outsourced fundraising service for private market funds. They can go as far as taking complete responsibility for a fundraise, support with the production of marketing materials or source and introduce new investors.
There are many benefits of working in a placement agent:
• You may work on several fundraising mandates at the same time. It’s fast-paced and entrepreneurial.
• There’s a steep learning curve as you become exposed to multiple investment strategies.
• It can be highly rewarding with significant bonuses associated with successful fundraises.
• As with in-house IR, you may not have exposure to institutional investors straight away. You will, however, begin to manage relationships with your clients, the private market funds, almost immediately.
• Looking forward in your career, the exposure and skill set that placement gives makes you attractive to in-house IR teams, if you want to move across.
About the author: Hafsah has worked at PER for over three years. She has coverage of fund of funds, secondaries and co-investment deal team positions as well as significant coverage of Investor Relations and Placement. She has a strong track-record of successful searches for first time Investor Relations or Placement positions and she supports on senior searches across Investor Relations in private equity, venture capital, limited partners and placement agents.