From numbers to narratives: How private equity engages private wealth

It is a truth universally acknowledged, that a private equity manager in possession of a good fortune, must be in want of a new investor audience. However little known the structure, size or expertise of such a firm may be on his first entering the market, this truth is so well fixed in the minds of observers that he is considered as the rightful recipient of industry scrutiny. 

But, as Jane Austen’s protagonists discover in Pride and Prejudice, not everyone’s a suitable match. And you can spare yourself some heartbreak by communicating better up front. 

Private markets have been creeping into new(ish) territory with retail investors. On that path, some growth pains have revealed the limitations of a one-size-fits-all approach. 

A recent article in the Financial Times highlighted a striking gap in fundraising; market data shows that smaller funds tend to outperform their large-cap peers on aggregate, yet about three-quarters of the capital raised in Europe went to funds that raised more than €1bn. 

Clearly, what has worked for mega-caps like Apollo and Blackstone won’t necessarily translate into the same success for mid-market firms – even as they court the same set of investors.

For new entrants looking to consolidate their presence in the market, it might be tempting to “let the numbers talk” and lean on their performance track record to convert investor interest in their offering. 

Sounds fair enough. After all, a promise of higher returns has been at the core of private equity’s pitch to investors amid a much less benign macro environment for listed companies globally. 

But they might be missing a trick here. 

An oft repeated (and frankly, trite) adage among marketing and communications professionals is to “meet your audience where they are” but perhaps that might guide us to the missing puzzle piece: convenience. 

Regular engagement fosters trust. Equipping financial advisers and other intermediaries with the knowledge and confidence to translate the value of a rather complex asset class to their clients, is a powerful differentiator for PE firms looking to tap new audiences. 

Crucially, this must be a proactive effort. A recent survey of financial advisers conducted by Adams Street Partners, shows that nine in ten clients frequently expressed interest in private markets investments. Coupled with another report from BNY Pershing, suggesting that private wealth managers prefer large managers with a pre-existing history of serving retail investors, it is clear that smaller firms must get ahead of the curve to avoid getting caught out by a classic halo effect at play.

Making the process less transactional and more educational also adds credibility to the above mentioned “numbers” by helping investors understand the investment approach and philosophy that underlies those performance metrics.

More importantly, it reassures them of the manager’s ability to navigate across market cycles and identify opportunities amid uncertainty and dislocation – well into the future. 

Effective communication also extends to maintaining transparency and building trust with existing investors. Regular updates and open lines of communication can make or break a firm’s foothold in a market where investor confidence can significantly impact funds’ ability to raise capital.

Tailoring engagement strategies to meet the unique needs of different investor segments, particularly retail investors, can bridge the gap between returns and investor confidence. Those who can identify dynamic ways to educate and engage their investors will not only stand out but also foster enduring relationships as an anchor for their fundraising efforts.

Much like the nuanced courtships of Jane Austen's novels, an ability to communicate effectively can indeed make or break a firm's attempt to grow its investor base as the wider industry evolves.