This podcast discusses the changing strategies of institutional investors and the need for general partners to adapt their fundraising strategies. It emphasizes the importance of gaining market share in fundraising and applying commercial excellence in the private equity industry. The podcast also explores the use of go-to-market strategies and market segmentation in fundraising, with a focus on professionalization and learning from other industries.
Institutional investors in the private equity industry have diverse capital allocation needs, requiring firms to adapt their fundraising strategies accordingly.
Private equity firms must adopt a commercial excellence mindset and employ targeted strategies to gain a share of the limited capital available in the highly competitive fundraising landscape.
Deep dives
The Diverse Landscape of Institutional Investors
Graham Rose, head of the America's private equity practice at Bain, discusses the highly varied landscape of institutional investors. He highlights that the term 'institutional investor' has become an umbrella term for various segments of the market, each with different capital allocation needs. This includes legacy sources like pension plans and sovereign wealth funds, as well as evolving players like insurance companies. Rose emphasizes the need for private equity firms to understand the specific needs of different segments and adapt their fundraising strategies accordingly.
The Competitive Zero-Sum Game of Fundraising
According to Graham Rose, fundraising in the private equity industry has become a highly competitive zero-sum game. With the growth of alternative capital, the amount of capital available to private equity is growing at a slower rate than fundraising ambitions. Private equity firms must therefore aim to win a share of the limited capital available. Rose encourages firms to rethink their fundraising playbook and adopt a commercial excellence mindset. This involves applying best practices from other industries and developing targeted strategies to gain market share in fundraising.
Applying Commercial Excellence to Investor Relations
Graham Rose suggests that private equity firms should apply principles of commercial excellence to their investor relations (IR) efforts. This involves professionalizing the IR function, adopting go-to-market strategies, and leveraging tools and tactics used in other industries like software. Firms can map out the different segments of institutional capital and tailor their value propositions and approaches accordingly. By focusing on commercial excellence, private equity firms can better position themselves for success in the competitive fundraising landscape and improve their relationships with institutional investors.