As asset managers face increasing demands from stakeholders, external-facing functions have become a driving force of meeting business goals. Investor Relations and Communications teams are gaining new ground with advanced ways to communicate with LPs, portfolio companies, prospects, media and other stakeholders.
Our Financial Communications & Capital Markets team has identified five top-line trends for effective IR and communications in private equity:
1. Limited Partners are seeking more proactive, consistent, and transparent communication.
Investors are asking more questions outside of regular reporting, such as “Why do I only hear from you when it’s time to fundraise?” and “Does the regulatory action against your competitor affect your business?” LPs are also increasingly asking for more information about the portfolio companies in which a firm invests, including the leadership team, diversity/ESG (this is especially a concern for state pension funds), and fees and expenses.
2. Differentiation is a winning strategy.
Competition is fierce in private equity — from fundraising to bidding processes. Firms must now develop and grow their brands and clearly articulate their vision and values to stakeholders in order to win. A few examples of how firms are differentiating themselves:
- Investment firms are increasingly bringing in external partners, such as Edelman, to conduct objective, third-party branding exercises to hone their messaging and narratives, develop insightful thought leadership programs, and identify key differentiating attributes. These partners are well-versed in the industry and have an objective view on how an investment firm can position itself among competitors to drive business.
- General Partners are thinking more creatively about how to enhance LP interactions. They place greater emphasis on being perceived as true business partners and creating an optimal experience for existing and prospective investors at meetings — from the initial invitation to content, logistics, and discussion flow.
3. Showcase results through portfolio companies’ success.
One of the most effective ways PE firms demonstrate their effectiveness is through the growth of their portfolio companies. Stakeholders, including LPs and media, welcome information about how a GP is supporting its investments. By promoting their successes, a GP can amplify its reach and help attract further deal flow.
4. Visuals help drive value creation.
Investment firms across all sectors rely on visuals to help explain their business. Videos are becoming more common in telling stories in a short amount of time. They help humanize the value the firm brings to LPs, portfolio companies, and other stakeholders. Here are a few ways firms are using visuals to better communicate their stories:
- During LP meetings, GPs use photos and videos to show the progress of their portfolio companies. Especially with technical or operational efficiency improvements (e.g., at a manufacturing facility or retailer), visuals help LPs understand advancements.
- Videos featuring GP leaders illustrate how the firm creates value and works with portfolio companies, and can be used to demonstrate their industry expertise. These are often housed on the firm’s website.
5. Select social media channels can help extend your credibility.
An increasing number of industry professionals agree that LinkedIn is a valuable brand-builder and platform for amplifying thought leadership and media coverage. More firms are getting comfortable leveraging LinkedIn to reach LPs and prospective investors. In addition, reporters legitimize sources through individuals’ LinkedIn profiles.
As IR and Communications roles continue to evolve, implementing a strategic and proactive communications program will help anticipate stakeholder needs and demonstrate the value a firm brings to LPs, portfolio companies, and other industry stakeholders.
Mike Geller is executive vice president and U.S. head of Asset Management.
Julia Sahin is an account supervisor, Financial Communications & Capital Markets, Edelman New York.