Today’s investors in private funds are being challenged with an increasingly complex and oversaturated information landscape. Accordingly, Limited Partners’ expectations and preferences for receiving, consuming, and accessing information have rapidly evolved. This makes it imperative for private investment firms to periodically reassess and refine their communications approaches to ensure they remain relevant, effective, and aligned with LP priorities.
Getting the Basics Right
In today’s environment, successful communication depends less on adding further layers and complexity, but instead on getting the basics right and executing exceptionally. Best practices need to be reassessed periodically as geopolitical, macro-economic, technological and structural shifts can reshape investors’ information needs. The following are some basic tenets communicators should keep top of mind:
1. Meet Complexity with Clarity
Oftentimes when communicating with LPs, less is more. Communicators should balance a desire for greater visibility with investor audiences by taking a thoughtful, structured communications approach.
Best practices include:
- Prioritizing concise, timely, substantive content over complexity. Executive summaries and the Axios-branded “Smart Brevity” are the preferred approach, while providing the full detail as an option for those who want to take a deep dive.
- Demonstrate relevance, making clear why your audience needs to know the information provided, rather than assuming they will connect the dots.
- Avoiding excessive jargon. You and your colleagues may be well versed in a company or industry where you have long experience, but your investors are tracking dozens, if not hundreds of funds and portfolio companies. Make it easy for them to do so by using plain, straightforward language.
- Consistently flag key messages, conclusions and takeaways. Make sure that your message is being heard.
Your primary job is to communicate about your fund, but it is not your only job. LPs also value GPs’ perspective on current market events and dynamics that are shaping the firm’s strategic course and performance.
2. Stay Consistent
Once you begin communicating, you can’t stop arbitrarily. Going quiet can be tempting during challenging periods, but an ‘on-and-off’ approach will raise unwanted questions. Best practice is to develop a cadence for key communications outside of the quarterly updates, and stick to it.
3. Get the Timing Right
You should never leave LPs guessing about your firm’s direction, nor surprise them with facts that lack proper context. Communicators can preempt potential confusion and adverse LP reactions by taking a proactive approach. Be thoughtful about timing to ensure that they receive the news from you first, and at the appropriate time.
For example, plans to strengthen the firm’s leadership bench may involve confidentially informing key LPs ahead of time, to not only positively impact allocation decisions or answer questions about the firm’s competitiveness, but also to muster support in advance of a broader communication.
Conversely, when communicating negative portfolio issues, speed and transparency (within reason) are critical. We have seen that firms who confront these sensitive situations head on with LPs while giving the appropriate context, receive appreciation and respect in return.
4. Personalize Outreach
As technology has improved the efficiency of communications, authenticity has become even more critical to sustaining and driving engagement with investors. Communicators should be consistently asking themselves, “Does our communication engage, invite questions, and drive interest in learning more?” If you’re getting radio silence, it may signal that your messages and materials aren’t being read.
Double-check if you are adhering to the following:
- Maintain a human voice across all channels and materials, so communications don’t give the impression as being AI generated.
- Demonstrate a thorough understanding of information needs and preferences specific types of LPs have (HNWIs, endowments, large institutional investors). Calibrate your communication accordingly.
For example, a family office accustomed to more mainstream strategies may prioritize more frequent, in-person briefs, whereas large institutional LPs welcome remote, live streamed or annual fund updates saving them time.
5. Responsiveness
The most important thing you can do to optimize your LP communications is to actually communicate with them. Proactively seek feedback on materials shared with them, on the pace of communications, and if their needs are being met.
While it is easy to get lost in efforts to perfect best practices and the overall communications approach with LPs, it is imperative to keep a flexible mindset. Just as the investment landscape and investor sentiment evolve, LPs’ information needs and priorities shift over time. Communicators must adapt on an ongoing basis to align with their most critical audience.
By Katrin Lieberwirth, Senior Vice President at Stanton.