The Prequin Investor Network conducted a survey of over 100 accredited institutional investors in August 2013 to assess their opinion of marketing materials received from fund marketers offering private equity, real estate and infrastructure products.
The survey became relevant in the context of the increased competition in the market; according to Prequin, a record 1,990 closed-end unlisted funds operate in the above sectors. In addition, investors are becoming more diligent and proactive while assessing investment opportunities. The fund marketer’s communication practices therefore play a crucial role in making or breaking a prospective deal. So, what do investors want, and what are they actually getting?
Here are the key findings from the survey:
How investors find new opportunities
The survey found that a significant number of respondents (61 percent) were exposed to new opportunities when a fund manager approached them directly. This is down from 72 percent observed in the 2012 survey. This fact, along with other indications in the survey, provide a valuable insight: a significant number of investors are now keen to devote time and resources into proactively finding the best and most suitable funds to invest in.
Communications from fund managers therefore need to suitably address this new class of self-driven investors.
Unsolicited fund proposals
Surprisingly, an overwhelming 91 percent of respondents said that they were bombarded with “unsolicited fund marketing material that did not quite match with their investment criteria”. In fact, out of an average of 35 fund documents received per quarter, only 16 were in line with the investor’s priorities, and of this number, only 6 made it past the initial filtering stage. On average, about 2 succeeded in getting investor commitment.
The message for fund marketers in this is that investors need to be given relevant, quality and structured information in the right quantity to secure their attention in the initial, most crucial phase.
There is another, more innovative solution: reverse solicitation.
This works the process in reverse: investors come to fund managers instead.
The Preqin Investor Network provides the means to generate such leads, allowing investors to scan all private equity, real estate and infrastructure funds in market for those that are compatible with their investment objectives. Once this is done, they can contact the fund manager through the Network to take the process further. For the fund manager, this means immediate access to an investor that is past the initial filtering stage—a vastly improved lead with far greater chances of fructification.
The survey revealed that investors were most unsatisfied with the availability of information in the initial fund marketing material, rating it 3 on a scale of 1-5. One respondent suggested that some basic information should be provided up front in order to save investors’ time.
The survey found that almost 33 percent of respondents rated the availability of comparative metrics as important, and 18 percent said it was very important. At the initial stage, “investors need to make comparisons between similar opportunities” and most felt that current market practices do not make this easy for the investor.
However, the Prequin Investor Network’s Key Fund Metrics feature makes this comparison a simple process.
Fund managers’ communication practices need to address the changing investor landscape and provide clear and structured data, as well as comparability of information, to make it past the first round. Prequin Investor Network’s Enhanced Fund Listings are a valuable tool that could assist in this process and provide a win-win for both investors and fund managers.