As your firm grows and expands into multiple strategies, managing LP relationships becomes increasingly complex. Misaligned communication, conflicting signals, and managing expectations across different strategies can strain even the strongest LP partnerships. Our panel of investor relations experts discussed best practices for building authentic, non-transactional LP relationships, understanding LP priorities, and strategically timing fund launches.
Watch the full video below and read on for a summary recap.
Tim
Okay. Good afternoon or good morning or good evening, everyone, depending on where you are. Thanks for joining us today. My name's Tim, and I'm one of the co-founders and CEO of Passthrough. Thanks for joining us. What we're gonna do today is I'm gonna have my, my panelist introduce themselves, and we've got a number of questions that we're gonna discuss. We're also gonna make sure to hit your questions too. And so there's a, there's chat functionality in this where you can just go put your questions in there, and we'll be taking a look at them, and we'll make sure that we go answer your questions at the end as well. But, hopefully, it's pretty interactive discussion. We're gonna start with intros. And so, Jamie, I'll turn it over to you first.
Jamie
Yeah. Hi, everyone. I'm Jamie Ngo, a Director here at Asante Capital. We're a global private funds adviser that focuses on institutional capital raising and secondaries advisory across a number of strategies, including buyouts all the way to infrastructure credit and some uncorrelated assets as well.
Tim
Margot.
Margot
Hi, I'm Margot Choi. I head up Investor Services for Sixth Street, which is best known as a private credit manager, but invest across a broad range of different asset classes. Here in our Dallas office. We also have offices in San Francisco, New York, and London.
Tim
Okay. And like I said, I'm Tim. I'm one of the co-founders and CEO of Passthrough. Passthrough is automated investor onboarding. That means that we can tackle things like your subscription agreements and tax forms and make it simple for everybody to fill them out, your own internal teams, and your external service providers to coordinate around them. We also offer KYC AML, and so that's going out and mapping your beneficial owners. And then we have a managed service offering in the US and in Cayman where we'll run them against sanctions lists. We'll make sure that nobody's laundering money through your fund. And we even have some fun updates in response to the latest SEC and FinCEN ruling from August of this year where ERAs and RIAs are now being, treated like financial institutions and similar to banks. And if this doesn't mean anything to you yet, it will shortly, and you should start paying attention to it because it's gonna take effect in just about a year's time. But that's not what we're here to talk about today. Today, we're here to talk about, what are the best practices for actually, having multiple strategies and multiple funds, and what does that mean for how your team works internally and also what it means for how you can actually work with your LPs. And so, we have a number of questions that we're going to cover. Like I said, if you have questions, please place them, in the chat and in the questions, and we'll make sure to go tackle them at the end. But let's start off with that first question which is what are the keys to actually launching multiple strategies successfully?
Margot
I think the key is having deep authentic, non-transactional relationships with the LPs that you connect with. That means you're talking to them when you're not in market. It means that, you know, you're spending probably the first 15 minutes of each conversation asking about them and what their priorities are. And when you have those deeper, more authentic relationships, it's easier to get the first meeting to talk about these things, and you can more strategically use your time with your LPs.
Jamie
Yeah. And maybe to add to that point, in terms of launching multiple fund products, I would say the timing of those launches are something to really consider. Right? You don't want to cloud the market with having conflicting product launches. I would say sometimes it can be complementary. So, for example, you have a large cap fund with a small cap fund, where you can stage it a bit where you're going out with your flagship product, and then you will go out with the product extension later once that flagship is already subscribed. However, the biggest thing is not really going out to your investors being, like, confused of what products are actually in market. So I think for you to successfully launch, I do think figuring out the right staging of it matters.
Margot
Yeah. And LPs can get decision fatigue. Right? So if you show up with a full menu of offerings, sometimes what you'll get is, the person you're talking to says, oh, hey. Just send me one of every pitch book. And that is not a good outcome because they're not gonna read through all the pitch books. But if you have a long standing relationship with them, you know what their priorities are, where they're leaning, you can narrow the field for them, and have more impactful conversations about specific things that they're actually interested in. An example is a recent LP, has been talking about switching mainly to direct co-invests for almost everything except European investing. So that pushes a whole range of our offerings right off the table. But we do happen to have a European fund in the market and being able to base all of our conversations and all of our energy for this particular LP around the things that are actually interesting to them without wasting their time or ours.
Jamie
Yeah. And I think that goes back to your point, Margot, about really having that close relationship with the LPs and listening to them. Right? So sitting internally as you're an internal sales person, going out to each of those LPs and understanding, okay, what are you looking for? And also keeping them close to the chest. Right? So, for example, if you're a firm and you're thinking about launching a product extension, really making sure that they feel like they're in the know rather than hearing it in the press through some PEI report, for example. So I think being able to really pick their brain before you actually think about even putting resources behind the actual strategy is extremely important.
Margot
Yeah. And incremental touch points, right, on a quarterly basis, on a biannual basis, where your goal is really just to build that relationship. Over time, it can pay off.
Tim
So that's the things to do. So let's say you're launching a brand new strategy. Where can things go wrong? What should you avoid doing?
Jamie
Yeah. I would say one of the biggest things that will signal a red flag to the LP is is when you're perceived to be AUM gathering. So you never want to launch a product because one of the partners one day just thinks, oh, like, everyone is raising a credit fund. Let's go raise a credit fund. There needs to be some type of rationale. Right? And to my point earlier in terms of talking to your LPs and also talking to the market a little bit to see, hey. Like, who actually is successfully raising these ancillary products or are actually being successful doing it is very important. But I do think it first stems with actually speaking to your LPs to get their sentiment. But once you get the rationale package so for example, it could be you are a big sourcing shop where you see over 4,000 deals a year, and it makes sense that a lot of those deals are really good deals, but they're outside of the size bracket that you're in. So that's when some strategies make sense to bifurcate into kind of the large cap versus the small cap fund. However, it gets a little bit stickier, when it comes to doing something completely different where you don't have the in-house expertise, where you actually need to hire an external team to build it out. So, for example, a credit product or maybe you're an equity shop that is launching a real estate platform and you're hiring a whole new real estate team. That comes off a little bit as an AUM grab. So being able to really justify that is very important and figuring out, okay, once they're into the broader platform, are they actually able to utilize the resources of the franchise to really help with their efforts in terms of sourcing and executing the deal?
Margot
Yeah. I mean, I think over the past 4 or 5 years, things have really shifted. Right? Maybe 5 years ago, private credit was, if not a foreign concept, a much less popular one. And over time, it becomes commoditized. Right? And as that happens, being able to be truly differentiated in your approach is really important. Right? Because they have a broad range of managers to choose from. And, you know, for us, it's all about our culture and the way we look at deals and the level of maybe call it sophistication or complexity that we're able to execute on. And so being able to come to a discussion with those kind of very specific differentiating factors for people who actually want those types of investments and for whom they make sense, and not just, you know, throwing spaghetti at a wall to see what sticks, it it makes a big impact. It makes you appear thoughtful, and it deepens that relationship overall.
Tim
When we were going through the the prep call on this, we actually talked about how Sixth Street has a really unique approach for how it can develop some of the expertise that Jamie was talking about and not just throw spaghetti against the wall. Would you mind talking about that a little bit, Margot, what you guys do that's different?
Margot
Yeah. I mean, we approach investing opportunistically. Right? So we have, we have our flagship fund that can invest across a range of asset classes. And then through that comes specific opportunities. Be that in sports media and entertainment, or in growth areas. Right? And as those things become apparent, we bring in the individuals with the expertise to tackle those, but ensuring that those people are truly culturally the best fit for Sixth Street. And what does that mean? That means being able to work across platforms. Not being the type of individuals who, you know, hoard information. And just being people who are authentic, humble, down to earth, which is, you know, it's the Sixth Street brand, but it is actually who we are.
Jamie
Yeah. And to that point, I would say when it comes to culture as well, something that is often associated with culture is compensation. Right? So that's also another key consideration when you're trying to launch a new strategy that you have to hire resources for is in terms of compensation. How are they compensated in a way to have them actually contribute to the greater platform and then also make them feel like there isn't this a team or b-team dynamic? So that's something that's super important to consider as well.
Margot
And one of the nice things about leaning into the non-transactional side of the business is both on the LP side and on the investing side, you build these deep relationships. And so that means that even when we didn't have a sports fund to market, we were talking with people who had expertise in the area and we were getting to know them. So that when the time came, we were able to find people who we already knew, who we could guarantee were a great culture fit for Sixth Street and who were excited to work with us because they knew us really well too. So I think overall that, like, non-transactional aspect is really important.
Tim
Jamie, can you talk a little bit about how what you think the ideal role for a placement agent is to play just in general, and what changes when you're dealing with firms that have multiple strategies as opposed to just multiple funds in the same strategy?
Jamie
Yeah. I think that, is a very key differentiator when it comes to using a placement agent is at the same time, the role is simple. Right? It's connecting the dots in terms of LPs and matchmaking to funds. When it comes to being a fund manager launching multiple products, Asante has actually developed an expertise for this where we've done minority funds. We've done, my other ancillary products, whether that's opportunities funds. So really thinking through how to strategically launch a different product. So with that being said, our role is the same, and I think it's actually more beneficial because from an advisory capacity, given we always have an ear in the market and are always speaking to LPs across bio, across credit, across infrastructure, and even uncorrelated, we really understand the different types of appetite there is out there. So when a fund manager is thinking about launching a fund, we become really helpful in a way because we can really think about, okay, what is the market doing? Right? Are they successfully doing this? Are they not? What are their pitfalls? What fees are they charging? What size of funds are they raising out and coming out with? And then the second would really be to help you figure out, okay, across your existings, how can we really really package that and say, like, hey. We're not being AUM gatherers that this is actually coming from expertise that we have in-house or maybe your own LPs are telling you that you need to do this because you're throwing away a lot of really good deals. So we can work with you in terms of the packaging of that messaging. And then in terms of the third thing, it's really figuring out, hey. Like, what is the best time to do this? Like, you're still in market with this product. You probably shouldn't come back to market and even think about this until you wrap up your franchise. Right? So really thinking through that. And then I would say the last thing that makes an agent really helpful in this partnership approach of being able to know you from the flagship side of things and also the product extensions is that at the end of the day, we're selling your team and your culture and the partners and really the strategy behind that. So whether it is your small cap fund or it's your flagship fund, we work really well in able to really classify and qualify who is relevant for either both or either products. And I think that throughout the life cycle of you being in and out of market, that becomes really helpful to have someone that can be a perpetual partner for you in the market.
Tim
So I think common consensus is the best time to go build relationships with LPs is when you're not fundraising. Yeah. And so if you're running multiple strategies, you might always be fundraising. And so do you actually think that, that common advice is true? And if it is true, how do you balance that with you're always in market because you always have funds in market and you still need to go build relationships with LPs. How do how do you handle those 2 things?
Margot
I think, again, it just comes back to knowing your LPs and not presenting just a full menu of funds and saying, we've got 8 things. Pick 1. Right? Saying, we know you, and we know what you need, and we know what your priorities are. And based on that knowledge that we've acquired over this long, long-term, like, deep relationship, this is the one thing that we think might work for you. And you know what? Maybe nothing will work for them at that time, and you're still gonna have a conversation with them and ask them questions about where they where, like, where their priorities are and, like, what they are looking at. And maybe that's not something that we have right now, but maybe we can introduce them to someone who can help meet that need. And the willingness and the ability to do that, is what will the next time something comes around that you actually that you're selling, that they do need to buy, like, you'll be at the very top of their mind. A good example is, one of the fundraisers who joined us about 3 years ago spent about 5 years prior to that talking to, like, one large institutional investor, and they had made 0 investments with him. So that could seem really discouraging. But after 5 years before, 3 more years here, they finally turned on their allocation to private credit. And he was one of the first people they thought to call because he had put in that time. He built the credibility. You know, he and he knew that he could go to them at that moment. He had, you know, the marker on his calendar when he knew that they were going to be turning on that allocation. And as a result, at least partially, you know, we end up in the running for a mandate that was pretty exclusive.
Jamie
Yeah. And I would say you bring up a very good point because even though a lot of people don't always like to be seen in market, it actually becomes an advantage in a way when you are raising multiple strategies. So to Margot's point, for example, if your equity strategy is having trouble and, look, now private credit is becoming the hot new topic, It's actually from the seat of the fund manager and the GP. It's actually smart to have multiple products. Right? Because even though it's perceived to be, yes, you're always in market, but it really makes sense because now you can kind of play in and out of certain markets at certain hot parts of the market. And I think that's actually helpful for your salespeople at the end of the day because now they're not in house at a team that's raising one product. And if that one product is doing badly, then they have essentially a very, very hard job. Right? So even from an in-house salesperson perspective, it's very important. And I would relate it to kind of my job at Asante where we're focusing across multiple different strategies for different fund managers or multiple products for one fund manager. And it actually makes it a lot easier for us to build relationships with LPs because you're not going there being like, hey. I only have one product, and I want you to tell me if you like this product or not. Rather, you're going and you're really building a relationship with them because now you are more insightful about different parts of the market because you have multiple fund products or fund strategies that are in market. And the conversations with you're having with LPs become a lot better because you're not trying to just essentially put something down their throat, and it's that one product that you have. So I've actually seen it where a lot of people sitting in our IR seats typically like to have these multiple fund strategies because it helps them to deepen those relationships and make it, to Margot's other point, not transactional.
Margot
Yeah. I think asking questions is just it's such a basic thing, but it's so important. Not just automatically rolling out your pitch, but find like, asking them, you know, non-invasively about what's going on with them. Like, what's important to them? Like, what do they see on the horizon? It's not only gonna give you market intelligence, but it's going to create, like, a better line of sight for the business opportunity going forward.
Jamie
Yeah. And there's a lot of things that you can do when you're not in market too. Right? So for example, every fund manager has your AGMs and your LPAC meetings. But outside of that, it's tactically thinking through, okay, who within Sixth Street, for example, is responsible for that relationship, whether it's a partner or whether it's a principal, depending on kind of the personality fit a lot of times. Having someone assigned to really manage that relationship when you're not in market for that strategy is very important. And spending time with them in person and being there when they have a question and not just getting it through some of the fund or client solutions, admin in terms of questions. So having those touchpoints are very, very important. And then the second thing that I would say is very important off cycle is making sure that you are spending enough time, building these relationships and building communities. And I think that's a big powerful thing that a fund manager can do is you have a community of LPs. Being able to also include other LPs outside of that community into your community is very important. So think about, hey– like, what are ways that I can be really helpful to that LP that I'm trying to build a relationship? Maybe it's connecting them to another LP within the circle of trust, or it can also be to portfolio companies, or maybe it's a healthcare system endowment, and they're looking for kind of strategic advice on some healthcare products or software, being able to think kind of outside the box to really help build that relationship at the broader level is very important, I think, and something creative that people can utilize off cycle.
Tim
One of the things that we talked about was thinking about the composition of your investor base and thinking about where you have strengths, where you have weaknesses, where you wanna think about targeting, and how to approach that. Yeah. Would you mind talking about that a little bit? Like, how should you actually approach analyzing what your relationships look like and where you should go invest in them?
Margot
I think it's important to be very deliberate and strategic about these types of decisions. And I think that data can be really helpful here. Right? And this is where, you know, technology can come in, helping us understand, you know, what the appetite of various investor types might be. And then finding people who have those relationships and using them strategically in those areas. For instance, we hired someone a few years ago to specifically focus on endowments and foundations. And they had all of this, historical knowledge based on their they were a very experienced professional, about what would be appropriate for those people, but they also had relationships so they could, like, build on those, even further.
Jamie
Yeah. And I would also bucket that in terms of LP type, but also geography. So, you know, for example, different geographies will take longer lead times. So we always advise for people looking to capture Middle East and Asia money, look, like, you're gonna have to build that relationship off cycle preferably because it takes so much longer to get them across the line. And when it comes to LP types, for example, you know that it takes time to really build relationships with a lot of the key consultants and gatekeepers. So spending times with those as priority, I think, are very important. And you can really stage it out. And then another thing when you're thinking about, your LP based outside of just type and geography is in terms of size. Right? Or in terms of your relationship. Maybe you're running co-investment processes every time with your existing, and they're just not taking it up. And you need more people that can write checks as x size. So thinking through, okay, for this next fundraise, how can I actually prioritize and plan for these different pockets of capital is very, very important?
Margot
And what you say is so right about different geographies. I think being realistic and really getting, like, a cultural understanding about the differences. Like, doing business in Japan is not doing business in Arizona. They are very different places with very different, constituents, in the LP base with different demands and different levels of sophistication and experience with your product type too. So it's just I think being realistic and planning around that is so important.
Tim
So one of the things that's behind everything we've talked about today is life with multiple strategies, life as a firm that has evolved from being a group that has a couple funds to actually being a firm in a franchise itself, gets more complicated, gets more difficult to coordinate everything that's happening. And so what role does technology actually play in investor relations, investor services as your firm grows more complex?
Margot
I think it's really important for firms as they grow to be super organized. And that sounds so basic. Right? But a really well-structured CRM system will help you understand how often you're touching your LP base, like, what the outcome of those, interactions are, like, how impactful they are. Are they leading to investments? And to help you strategically plan, like, in the time ahead. Right? It can also just make you so much more efficient. Right? Because if you're trying to we talked about this a little bit the other day. If you're trying to remain efficient, you can't just keep throwing bodies at this. Right? You need to be able to scale, and you can't do that without systems and technology supporting that.
Jamie
Yeah. And to your point, once you have the system in place, and we've had so many conversations across our clients and even internally about our own CRM system. The thing is you can change your CRM system multiple times and spend all the money and resources to really do it. But if you don't have the buy in to actually get the adoption from your team members actually using it. And especially if multiple people are using it differently or maybe not even using it at all, then it doesn't work at all. So I think that's the biggest thing with technology, and especially as people are throwing around words like, oh, how do we use chat GPT and AI and all of this? And it's become such a pipe dream. And sometimes you need to kind of dial it back and say, like, hey. Like, look at our internal system right now. You aren't even using it. So let's figure out a way for you to at least use it, and then we can kind of think about the different add ons and functionality. But I will say one thing that is very important, I think, from evaluating CRM services is having the functionality to really cater across different strategies if you have the different strategies, or you might use it a certain way. So being able to really think through, okay. Like, what are your priorities? So it's probably going to be tiering. Is it matchmaking in terms of the notes? Like, is there ways that we can easily say, like, hey– they're looking at credit in direct lending, and they're not looking at this type of credit. Being able to really think through those keywords and having that functionality is really important to categorize it. And then I think the second thing that people overlooked is what I call the client relationship management part of the CRM, which even though the CRM, that's what it stands for, a lot of times, all it does is become a data storage place rather than an actual functionality where it actually is saying, hey. Reminder to check in to x, y, and z. So I think really evaluating that because especially if you have a lean IR person or a team of just 2 to 3 people, you don't have that bandwidth to go out and really write all these emails. You need to really think through, okay. I do need to figure out how to really do the email campaigning and also the check ins of, like, hey. And, also, there's another layer of complex complexity where it's okay, maybe I'm the project manager internally, but there's now a bunch of salespeople I have to really manage as well. So being able to make sure that all the different layers are using the data stack that you have appropriately is very important.
Margot
And this is something we've been talking about internally a bit is the appropriate staffing. Where do your engineers sit? Right? And we're thinking more and more than it makes sense to have at least a portion of the engineering department embedded in the businesses that they're servicing. Because there are all these awesome standalone systems but being able to get them to talk to each other is going to just like exponentially improve your ability to, you know, to target certain markets. For instance, maybe bringing in market data from a Preqin or, a Pitchbook to build out your roadshow for your newest, fund that you think is marketable to pension funds in the Midwest. Right? And being able to juxtapose that with people you've actually spoken to. And where AI people always, like, talk about AI as though it's a magic wand, but it really is, like, systematized figuring out how that can help you. Can it help you, like, connect dots that, like, you might not be connecting? But in fact, it is not a magic wand, and it takes, like, actually very skilled professionals to integrate those things with your own data and to also be very cognizant of the security issues that are around that. Right? Because, we're in a highly regulated industry and, you know, data protection is very important. But an investment in those areas is not something that will necessarily have an immediate impact, but the long-term impact could be huge.
Jamie
Right. And I think, obviously, I think the CRM is number 1, but there's also other things that IR people or the partners have to do every day that's also crucial to the IR team. Right? So for example, it can be something as simple as note-taking. And, obviously, there's a lot of different service providers out there doing a note taking service where they're plugged in, but then you have regulatory issues that come up with recording messages. But all we really want is basically for us to hear voice-to-text. Right? And that's simple, and it makes our day so much easier because note-taking is such a pain. And then the third thing I would say that comes up a lot is diligence request and being able to really make sure that when you're going to portfolio manager asking to x y z question, you're not going back 3 months later with the same question. Right? So I think thinking through some of those service providers or tech stacks that can really think through, okay. How can I use data, capture it, and then spit it out is a great way to enhance your current IR function.
Margot
Yeah. I think educating the people throughout your organization about the options that are out there can be super powerful. I can tell someone in IR that they should use x y z, proposal management software, and if they still like to just dig through old RFPs to find answers for things, they're gonna keep doing it. But if I explain to the portfolio manager that if, you know, the team adopts this new system that they no longer will be getting the same question over and over, or, God forbid, seeing incorrect information go out or outdated information go out. They can be huge advocates and can really help drive adoption of those things. And I get it's hard. You know? It's hard. Change is hard. But, I think having a organizational culture that kind of leans into it can be really helpful.
Jamie
Yeah. I would say it's very top-down in terms of the tech adoption. Right? But I think to your point, in terms of just having that one person internally that it can be really useful for or have that problem that they need to solve, be the helpful champion internally, could be very helpful. Because at the end of the day, people like to keep the IR function cost lean. Right? And I think that that's always been the biggest hurdle is figuring out, okay, how do we get increased budget for certain things? And I think that one way to also get around it, in terms of even technology adoption is also sharing with your peers. Right? So thinking through, hey. Who are my network of people that are also in IR or at other firms and sharing notes of, hey. Like, what CRM do you use or what diligence provider or RFP provider you're using? That can all be really helpful too, and I know that some of my best IR techniques come out of conversations. Like, for example, I had an IR friend that told me, hey. Like, you should stop taking meeting notes. And instead, like, after you come out of a meeting, just talk to it in your phone and then just do voice-to-text and then just send it to yourself. And I was like, wow. That takes me 10 minutes of talking versus taking an hour to write down the full hour of meeting notes. So it's things like that where you really learn through just sharing with your peers, and I think creating those communities where you can do quarterly lunches with people in your network to really trade ideas and think about the pitfalls and also the highs that you are doing and really thinking through that together helps because then you can kind of come back to your firm and say, like, hey– I heard about x y z doing this, and it builds your credibility a bit more.
Margot
Yeah. And, again, I feel I feel like the theme of this is just relationships and culture. And it's it's so helpful both in terms of that and, you know, in terms of our relationships with our LPs. It doesn't have to just go one way. So, like, having those non-transactional conversations, relationship building amongst your peers in the industry can just, you know, be hugely beneficial both ways.
Tim
Okay. The technology question really took off. So don't ignore the culture. Don't ignore the relationships. But don't expect to grow your AUM without increasing your headcount dramatically unless you invest in technology. Okay.
Margot
Great summary.
Tim
ChatGPT. What can I say? That was the secret word of the day was ChatGPT. So, we have a couple of questions to go through from folks. If people have other questions that they'd like us to go address, let me know. But we can start off with this. In the difficult fundraising environment today where LPs, for example, in venture are looking for distributions, historical performance is one of the main differentiators. What portion of the differentiation LPs are giving to performance versus strategy thesis and team platform network resources?
Jamie
Yeah. It is funny because I actually looked up the stat this morning. There are 3,400 plus venture GPs out there, as opposed to buyout, which is around 1,200. And then when you dwindle it down to private credit, only 400. So there's a lot of venture money being raised out there. And one of the critiques, and this isn't only towards venture, but also towards growth, buyout. A lot of the equity strategies is obviously DPI and getting that capital back. So I will say the one thing that we've learned in a lot of these fundraises is performance matters. Right? So you have to really think through how you can market through that, which comes to the point where maybe it's something unrelated to your actual, performance that you can lean into. So for example, it might be a sourcing edge or it might be 1 or 2, 3 deals. And especially if you're in venture, it only takes a couple few home runs for you to really get out there. And we've always had the conversation internally, and a lot of the GPs that we advise is look like, hey– we're not 1st quartile. Will it be hard to market? And the answer is it will be tougher, but it actually helps with our job because now there's a story to tell. Right? There might be upcoming exits that we need to market through, or it might be a rebranding that we need to do. So there's ways that are considered to be something favorable to LPs that aren't necessarily performance, and I would tell you that a lot of the 2nd quartile, 3rd quartile funds are still raising money. Right? But one thing that I will caveat is really rightsizing in terms of the amount of capital that you can raise, and that's something that we've had a lot of hard conversations with our GPs about. Like, you can't be someone that has, a performance that is a bit second quartile, 3rd quartile, and you're looking to double or triple fund size. Right? That doesn't work. But if you right size your fund and you know that with the strategy that you have in place, even if you're not at the top of the stack in terms of performance, you will raise money and you will get there.
Margot
I mean, I agree with everything you said. And, also, it just comes back to staying true to your investment culture. Right? Like, your performance might not be there, but people, you build credibility through consistency. And and if your investment culture remains consistent even during trickier times, that can be really impactful in the long run.
Jamie
Yeah. And maybe another point to hit when it comes to this, LP differentiation and how they really bucket you is you'll be curious to see that, actually, a lot of the first time funds that raise are people that actually are LPs that know you. So a lot of it sometimes is family and friends' money that are giving you the club deal to really get you on the franchise, or it might be LPs if you're spinning out of another credible fund, those that knew you when you were a partner back at your old firm. And then, obviously, you become more diversified as you kind of move on in terms of your franchise. But I think the key theme here is people invest in the people. Right? So if you think about all these different funds, and I see it every day. Right? Like, everything sounds the same. So everyone has a sourcing edge. Everyone has a value creation playbook, and then everyone has different marks when it comes to performance. But in terms of the actual packaging, it typically is often very similar. So at the end of the day, you need to spend the time with the LPs for them to really understand you, your strategy, and your ambition. And that sometimes is something that helps you market through these tougher fundraising cycles as well because now fundraising is even more difficult than it is ever before. I would say in terms of the actual stats, it's 7 months now from the actual PPM launch to the first close and then another 24 months post that first close to even make it to the final close. So there are a lot more hurdles, especially in this fundraising environment to market through. But the more you can really hone into your differentiation outside of just your performance and spend that FaceTime with the key LPs, and then have the good LP references that know you best to also be your positive reference. That's very important.
Margot
Yeah. Letting people know you– being, you know– authentic and being transparent can be huge differentiators.
Tim
Okay. So then we got a different flavor of this problem. So instead of, where you still need to go get some of those distributions out to people, let's say that you're trying to reach out to LPs with a new strategy when your current strategy has performed above expectations but has actually reached capacity.
Margot
I think this is it's really hard. Right? It's something that managers who've been around for a few years now, including Sixth Street, are experiencing where it's not hard to get a 1st meeting. A first meeting is easy. They know who you are. They understand your asset class, and they're happy to talk to you. But it's those second and third meetings that are a lot more difficult and actually getting action points, like, from those from those discussions. So, again, I know it's a broken record, but, like, listening to what people are really saying to you and not just going in with, you know, your strategy and, like, refusing to, you know, refusing to vary your message depending on what they say. Being truly listening to what they say to you, asking them questions, and being ready to pivot if they tell you, you know, actually, I don't ever wanna think about investing in Europe, but I am invested in sports. Okay. Let's talk about sports. We, like, put that aside, and we'll talk about this other thing instead. And just trying to be really responsive. Because, you know, that good performance will get you in the door, but it's what you do after that that can continue to build the relationship and actually help you, raise your future funds.
Jamie
Yeah. And I love that question because oversubscribed funds are the placement agent's dream there. So we've actually had a a number of fundraisers where we're actually in talks right now in terms of starting product extensions. And I think that to the point, once you are in the aura of oversubscription in the market, there's a lot of hype that comes up to your franchise. So there becomes a play where it's basically all these LPs now wanting to get to know you. Right? So, actually, if the rationale for your new strategy is solid, you will be able to come to market and be out of market in a very short amount of time because one, a lot of the actual underwriting of that new strategy will typically be the LPs that have supported your initial flagship product. And then the second thing is now there's gonna be a lot of LPs that they're like, hey– we missed out on your flagship fund. However, now we actually wanna partner with you in some way, so we're willing to look at this new strategy. However, the one thing that I will warn in terms of that is to the point of making sure that you're maintaining an air of exclusivity, and that's really something key when it comes to marketing that I don't think we've touched on yet. And being able to show that, look, there's a lot of hype around our franchise, and we can't really give you a look. But maybe if depending on kind of where we shake out with our existing underwriting, we can maybe give you a look. So you really wanna make sure that the people that are looking at this new strategy, 1, have the pocket of capital to actually qualify with that strategy and in terms of timing of when you launch. Right? So I would say before you go out and broadly market this new strategy, just have the conversation just being like, hey– like, what's your program like right now? What are you looking at? Oh, like, that might be a fit for something we're thinking about down the line, but we're keeping it exclusive to our LPs right now, but we'll let you know, and our team will be in touch with you.
Tim
We had we had one customer of ours that had a, it's a really nice problem to have. People want in and you don't have space for them, and they actually used it as an opportunity to clean up their LP base. And so they were able to take some older investors that were in some of their funds that had a little bit more tenure to them, and they're able to get them out through a secondary to bring that LP in to form the relationship ahead of their next flagship launch. Because there's still people right now that are actually looking for liquidity. That's kind of the name of the game for a lot of people in privates just broadly. And so they've had that as an opportunity for them to kind of 2 birds with 1 stone. Get the new strategic one in who's aligned with where you're raising and also clean up, some older LPs that might not be in in your future plans.
Jamie
Yeah. The LP tender process is a great way to to build the relationships with those new LPs. And then something, in relates to the topic in terms of multiple funds and strategies is GP led continuation vehicles are another way to manage liquidity going back to the old question. So that's something that has also helped to broaden the franchise as well. So instead of launching some type of extra product extension, there's ways to also think about, okay– what are your champion assets, and maybe let's bring them into GP led continuation vehicle because all our LPs are saying they're not getting any distributions. So there's a way to really put rationale behind that and then come to market with that solution. And that's something that is probably for another, webinar. But it's a whole discussion.
Tim
Okay. Cool. Well, hey. I know that we've spent nearly an hour having this discussion. Margot and Jamie, this has been fantastic. Thank you for sharing everything. It’s been great. To people in our audience, if this has actually been an interesting thing for you, Passthrough actually sponsors lunches where we can make sure that you can get your peers together and have these kinds of conversations in person. So if you're ever interested in doing that, reach out. We're happy to have that conversation with you.
Margot
Build those relationships!
Tim
Bingo. That's the name of the game. Alright. So for what comes next, we're actually gonna send you out a survey now that this is wrapped, and we're gonna ask you about what worked, what didn't work, what are the things that you wanna see more of in the future, and what other topics we can talk about. It's also going to include a book giveaway. So we're gonna be giving out “Barbarians at the Gate,” one of the modern classics of LBOs. We're also gonna share a recap, and we're gonna share the recording, once we've cleaned it up. And if you would like to get in touch with Passthrough, you can reach out to me. I'm tim@passthrough.com, or you can just email sales@passthrough.com, and we're happy to have a chat. So thank you very much. Again, Jamie and Margot, this has been a great conversation. Thank you to our audience. Have a great day. See you later.
Margot
Thanks, Tim.
Jamie
Thanks, Tim. Thanks, Margot. Bye.
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