How data-driven technology is helping asset managers identify and influence online investors and allocators
Over the last 20 years we have helped large and small asset managers solve marketing and distribution challenges, learning many lessons along the way. For those of you considering outsourcing your fund marketing and distribution, this edition of Oversubscribed will provide insights for first time and emerging managers looking to engage a marketing agent or team. First things first…
Choose your marketer carefully.
Challenge: Moving beyond the “Rolodex Decision”
When managers engage a third-party marketer to assist in raising capital, many are quick to rush to what we call a “rolodex decision.” A rolodex decision involves engaging a firm or marketer based solely on the perception that the marketer has an incredible network and would be successful in making favorable fundraising introductions.
While having access to the network of marketer can be helpful, it will only take a manager so far. In fact, it’s more important to find a marketer with a proven approach to fund distribution. Successful placement agents and third-party marketers will contribute more than just a network, and they will position the manager to stand out among other asset managers seeking fund-dedicated capital. When choosing the right marketer, consider their proficiency in the following areas:
- GP/LP research to understand current capital flows and trends among fund investors,
- Well-thought manager positioning for marketing collateral and communication strategies,
- A deep understanding of the decision-making processes of the target audience,
- Omni channel marketing and communications (Right time, right place, with the right message),
- Lead scoring of investor prospects throughout their journey
- Diligence documentation and data room organization
- Transparent investment documentation and reporting
In addition to making strategic introductions, a placement agent should be involved in all aspects of the fundraising campaign, including strategy research, collateral development, marketing and communications, investor lead scoring, and closing support.
Managers should move beyond typical CapIntro and look for a firm that can design and execute a well-planned fund distribution strategy that will properly communicate the value proposition of the offering. GP/LP and strategy research helps identify and define the most viable investor audience(s), while providing investor motivations and insights to help properly position the manager with that audience.
Things to Look for in a Marketing Partner
There are many desirable attributes to seek in a marketer. Here are some of the most important qualities that successful fundraising partners will exhibit:
- Market Relevance and Experience – Ask for details on previous engagements with similar strategies or targeted investors, especially the strategies and investor segments where they have experienced most of their past success. To manage distribution relationships, fund placement teams should be in the market with other offerings—with relative frequency. Additionally, a marketer should be well-versed in the current trends in the LP community. With a solid knowledge of the audience, the marketer can position managers to solve the needs and interests of allocators.
- Investor and Manager Data – Access to an investor database, insights to current LP trends, and information on capital flows are imperative to properly position a manager with the right investor audience. Understanding the data behind your marketer will offer great insights into how they view the process. Do they have a proprietary database? Do they subscribe to Preqin or Pitchbook (or others)? And importantly, will they share that data with the manager in a CRM?
- Expectations – Successful fund distribution takes time and requires preparation. Open and honest communications allow managers and marketers to understand timelines and set realistic expectations. Building successful fund distribution requires more than a three- or six-month effort and if anyone says or expects otherwise, the relationship is likely to fail. With clearly defined marketing expectations and fundraising milestones, managers, and marketers can build long-term, collaborative relationships.
- Marketing & Communication Strategies – Manager positioning and marketing is critical for fundraising success. Merging the capabilities of the manager with the needs of the investor helps fund placement agencies build relevant marketing and communications for targeted audiences. Managers should look for a defined process with creative assets that will help set them apart. A time-tested, well-thought-out process will provide a framework to tell their story.
- Licensing – Gone are the days of “guys who know guys” distribution strategies and unlicensed connectors. While it sounds obvious, it is important to ensure fund marketers are properly licensed and engaged with a reputable broker-dealer. If not, marketer discussions should stop there. While there used to be some gray areas, current securities laws require individuals who solicit investments in return for transaction-based compensation be registered as brokers.
If you do choose to outsource fund distribution, realize that not all marketers are created equal, nor do they provide the same level of service. A respected team will help you understanding trends in the LP and GP community, provide diligence support, guide on collateral development, as well as serve as an extension of the internal team. Taking the time to conduct your own diligence on fund marketing agencies and placement agents will help you make an informed decision when engaging a partner with the right background, coverage, and capabilities.
Understanding the marketer’s strengths and capabilities is paramount, which will help establish expectations of the partnership. The sales process in a capital campaign involves more than getting an introduction and setting up a meeting. In fact, nothing will demonstrate a manager’s ability to serve investors like well-thought marketing, diligence documentation, and consistent communications. Additionally, guiding and communicating with prospects throughout the journey can play a key role in earning their trust. On the flipside, unrealistic expectations, poorly conceived positioning, minimal understanding of a targeted audience, delayed follow-ups, poorly articulated due diligence questionnaires, and unorganized data rooms will not only serve as momentum killers but will also come back to haunt a manager in conversations with other allocators. The investment community is a small one… treating every investor interaction as an opportunity to engage a new brand ambassador is a strategy that will pay dividends in future campaigns.
Ultimately, allocators invest because of their belief and trust in the manager. While the marketer can help influence investment interest, the final decision will be based solely on the investor’s perception of the manager. However, working with the wrong marketer can damage a firm’s long-term reputation with investors. Finding yourself locked into a relationship with an underperforming distribution partner can lead to wasted time and resources, sending the wrong message to potential investors looking for smart, well-prepared managers.