Rookie retail investors and ESG benchmarking raised worry lines on the faces of attendees and speakers on day one at the CFO & COO Forum in New York. Their conclusions? ESG is here to stay but beware what you wish for; the retail investors bandwagon is rolling but without brakes. How’s that gonna end?
Anonymity of opinions was guaranteed. Not all agreed with the snapshot sentiments below. The tone, however, was muted, reflective, cautious and with some significant reservations.
Six views on ESG
Here to stay? “Oh, it’s serious … you have to have a policy now.”
Who? ESG demands are “definitely … from European investors, a few Canadian investors, some US investors.”
Legacy ‘dirty’ investments? “There’s never any follow-up from our investors on a three-year-old investment.”
PRI Pain: “We’re not UN PRI (Principles for Responsible Investment adherents) even though we are at 95 percent of what’s demanded. That extra 5 percent is hard.”
Believe it, fee it: “Some institutional fund manager want to know that part of their fee is going to something they believe in.” That’s challenging to meet.
Unintended consequences? “The cost, drag on investments and overlooking good investments.”
Six views on retail investors
Re-tale: “We are seeing a lot of movement in the retail market, there’s a lot of money out there.”
Er … we’re private: “My fear about all this is that the more retail investors there are in your fund, the more difficult it is to stay private. And we’re private equity.”
Disclosure: “Things you’d disclose to an institutional investor, you’re not going to disclose to a retail investor.”
The check please: “I see-high-net worth individuals as the dumb money. They have different investment acumen … they call and say, ‘When can I get my check?’ and I say, ‘There is no check.'”
Houston… “I think there are problems out there…”
Ch-ch-changes: “The LPs are shrinking the number of GPs they’re dealing with … so we’re being forced to look at retail.”
Five views on fundraising
Another country: “It’s a different place from where we were five years ago. The level of interest is overwhelming. The level of sophistication is very wide. This is institutional-led investing.”
See the shrink: “The LPs are shrinking the number of GPs they’re dealing with. [Convincing investors of the strength of] a new team can be a challenge even if we’ve got rid of an unsuccessful team.”
Fees? Are you getting pushback on the two-and-20 model? “No.”
Hedged: “Hedge funds have had their day, and we have had ours.”
Five views on co-investment
Record it: “You have to document the co-investment to show that there was a fair process.”
Vehicles: “I think this area is likely to see dedicated vehicles that sit alongside your fund.”
Conflicts? “There’s sole discretion and there’s ‘hidden conflicts’ in all of that. These are the most uncomfortable things we see when dealing with the SEC.”
Hard: “It’s really hard to get LPs to agree to (fees) in co-investments.”
Seconds out: “Secondaries is definitely interesting as an asset class and it is becoming more robust, but you have layers of who-knows-what in there. The secondaries help create liquidity but it’s creating a synthetic public market.”
Four views on ILPA
Pain: “I rolled ILPA across all the funds. It was the right thing to do and it was a pain to implement but it’s good to say it’s 100 percent compliant.”
Relationship difficulties: “I didn’t like ILPA’s recent guidelines on their wish list of what’s a good relationship with an LP … it’s a little bit far-reaching.”
MIA: “I’ve not had one request on any of the missing lines on ILPA.”
Moan: “The only time I had complaints [from LPs] what when we moved to ILPA templates!”
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