Approaching IR like marriage

The relationship between limited partners and general partners works best when run like a marriage – so if a GP, as the husband, wants multiple wives, he better know how to take care of them.

That was the rather unusual analogy used by a speaker at PEI’s 2013 Investor Relations Forum in New York last week. The point being made was that each LP has individual needs, and the GP needs to be aware of those needs and ready to handle them.

It may seem obvious to GPs how important relationship building is to their IR strategy, but translating that principle into tailored action isn't easy, apparently. According to a recent survey of more than 100 LPs, which PEI’s Research & Analytics team presented at the conference, a majority of investors felt that GP communications were merely adequate or could be improved. Only 3 percent of respondents described GP communications as “excellent”.

Clearly then there's room for improvement. What investors say they want is more regular and earlier indications of portfolio company performance, more face-to-face meetings and more detail on the fund’s investment focus and structure, to name the three biggest communication gaps survey respondents cited.

And they don't just want to be called when it's time to make commitments. One LP at the forum said he wants GPs to approach the organization in-between fundraisings. “That gives us a couple of years to hear your message, and then observe if what you say actually played out.”

In other words, don’t just visit when you want something. It’s like bringing your wife flowers, said one delegate: don’t just do it on Valentine’s Day, do it on a random Monday, just because it’s Monday.