PE IR "growing"?
Have been reading up on some past discussions about PE IR (in house or otherwise) and IR for stuff like HF due to personal interest in going into that field, and there is a repeated point that the space is "growing". Anyone can clarify what they mean? Is it just that more people want to go into it (since its usually small teams/niche space)? Or as in PE firms are spending more resources/giving more comp for these roles? I also know that typically, deal > fundraising/IR type work in prestige/precedence/resources, how does this factor into this as well? Also, any numbers to show this growth or who you are hearing this from (just peers in the space, or like are there stats from these companies)?If anyone could give more details would be helpful!
Heard IR is basically a PR job - no real skill required and becoming commoditised. The value add of an IR team is going down
Here we have a very insightful comment from a shitposting troll who has never stepped foot in a private equity firm
A good IR person will be very knowledgeable of the portfolio and can basically answer most questions about investment companies. You have no idea what you're talking about.
The field is growing because there is new firm creation and firms are growing AUM meaning they have larger LP bases to keep track of.
For example, most VCs didn’t have IR historically. It would be handled by older GPs/firm founders, but when you cross a certain threshold, call it $500mn of fund size, the time commitment of responding to questions/calls from that LP base grows. So you need to hire. We can debate the fund size at which point it makes sense to have dedicated resources, but when fund size grow 50-100% in subsequent raises, the need grows creating more jobs. Increased reporting requirements for LPs also plays a role in the growth of this field.
Is it commoditized/less analytical? Less analytical, definitely. Your work is relationship and distribution focused. Is it commoditized? As an LP, I don’t think so. Firms like Advent who have best-in-class IR have a competitive advantage over other large firms. These professionals know the portfolios inside and out and can give time back to GPs to focus on their day jobs.
As an LP, I’m happy to speak to IR at certain funds because all my questions are answered and they have fantastic reporting/annual meetings. In other cases, we require the time of a PM or partner quarterly or semi-annually because IR is ‘useless’ and reporting is poor.
I'm curious to learn about your perspective. Why wasn't building IR teams as prioritized before? Was it just not as many funds reaching that critical AUM threshold, and it just so happens a lot are hitting it now? Or was it just less valued beforehand?
It's hard to pinpoint exactly why it is more prioritized and why firms are growing their IR teams. I think it really comes down to the velocity of fundraising (3-4 year cycles to ~2 years or less in VC) and the growth of these funds. LP reporting/heightened DD/increased co-investment is a distant second to the above.
Echoing this as another LP. The IR teams can make or break a fundraise. As a large LP, we have too many questions for the partners and a well informed IR person can make everyone’s lives so much easier. This is especially helpful when it’s not a top decile manager and priorities need to be made with bandwidth and time allocation. Don’t get me wrong, when discussing deals we prefer a partner’s time but sometimes that’s a hassle to schedule and get organized.
What are the funds where you feel IR has been value adding in your experience?
Can add a load of value. Just look at Carlyle’s flagship fund returns and their recent fundraising if you ever need evidence. Plus you’re paid based on what you raise, so there are even a couple of mid level IR guys who pulled seven figures during the later stages of the pandemic when fundraising went nuts.
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Could you explain what this is? Not too familiar with these areas.
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IR is basically growing b/c PE firms realized that it's better/easier to focus on the "2" rather than the "20% (i.e., fundraising is where the bulk of the reliable recurring profits come from). PE has gotten super saturated and so difficult to generate outsized returns, so you can make more as a PE firm by raising as much as possible and charging 2% on that.
As an aside, IR is far and away the most physically attractive cohort of the fund. Gender agnostic...
It's a great space to build a career in and there is a lack of talent. I've been finding it very hard to hire (much like everyone else) and there aren't many people on the market with good IR experience.Raising money is very challenging. It's much harder to convince someone to give you $100 million than it is to give someone $100 million. Those that are successful don't need to be overly analytical but they need to be organized, have attention to detail, be very commercial, and be relentless. Fundraising doesn't ever stop. Even when you're not in market you need to soft marketing the next product. The institutional side is incredibly saturated whereas the retail channel presents a huge opportunity as someone else mentioned. Comp potential is strong with 1st year associates pulling down 200-250k and senior folks can break into low 7 figures.Lastly, you should align yourself with the fundraising engine. That generally means you either take a sales role or a product role. You do not (usually) want to take a reporting or mid/back office seat.
EDIT: You won’t be as well respected as the deal team but there are many firms that value capital raising (and many that don’t). I find senior people realize the value of IR and fundraising as they want a larger fund and carry pool. I’ve dealt with new associates that will try and give me attitude or treat me like some back office employee and I shut that down real quick. I generally have a much better relationship with the senior investment team then they do.
How do you respectfully shut down the attitude from the Associates giving you a hard time? Feel like this would be valuable advice in general.
Start with a solid reputation internally. From there, just stand your ground. I currently don’t have a ton of junior resources so I’m stretched thin. When deal team members try and push deliverables onto my plate I politely point out that I’m delivering you capital for your deal/fund/whatever and we should allocate workstreams based on a “highest value use of time” methodology. That is my nice way of saying no. What typically happens is there boss agrees with me and the associate just looked silly trying to pawn off work.
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If you know, how hard is the move from an institutional sales/national accounts/product strategy desk at a LO AM to PE IR? Is there any overlap in the skill set or is it apples to oranges?
This should be an easy-ish switch. Generally, the sales/fundraising skill set is similar across most products. There are obviously differences between open and closed end fund structures and retail vs. institutional channels but as long as you can speak intelligently to these nuances you should be fine. You just want to demonstrate that you can develop an understanding of the strateg(ies) you’ll be marketing and that you can exercise a process. It’s increasingly important to be an expert in your strategy and that you can step in front of clients/prospects and create leverage for your investment team.
Thank you for this, very insightful. Could you tell us about the challenges/ barriers to entry of accessing the retail market? Like only 2% of it has been touched according to the 1st person. Off the top of my head, I imagine that its because 1) its inefficient to individually market to small retailers who can't invest large sums at a time, so we have to get them to invest collectively which is difficult, and 2) they don't have knowledge of these alternative investments to start with, they're much more comfortable investing in traditional assets & mutual funds. Correct me if i'm wrong
A lot of it is due to structure. Traditional private funds just aren’t setup for individuals to invest. I don’t have the breakout off the top of my head but there is probably a chart out there that quantifies retail assets by net worth bucket and I imagine a lot of those assets come from people with $10 million liquid. If you have $10M and you want 50% alts exposure you’ve got $5M to play with and to come in direct to a fund that’s usually the stated minimum (sometimes $10M). With feeders through wirehouses you can write 100-250k tickets but what if you don’t want to file K-1s at tax time? Well you can’t commit to any of them. The massive growth you’re seeing in the semi liquid space is what will drive alt adoption by retail beyond just feeders setup by the wirehouses. BCRED, CTAC type products with 50k mins, liquidity options, and 1099 tax filings.
You're absolutely right on both points. It's much harder and inefficient to raise 100 tickets of $1M each versus one $100M ticket, especially considering it's not like the $1M ticket is 1% of the work. That is changing as you have new platforms that are "democratizing" alternative investments such as CAIS/iCapital that help to streamline the operational challenges of raising small tickets. Before that, you would only get access as a retail investor by having your assets with a large wirehouse (UBS, BofA, MS) that sets up their own feeder fund to aggregate and invest in private funds.
One additional point to add is that private placement funds also typically relied on SEC Reg D exemption, which requires investors to be accredited investors (https://www.investopedia.com/terms/a/accreditedinvestor.asp) which limits the universe of retail capital available to invest. However, there has been a growth of public nontraded vehicles that has allowed managers to access more mass affluent investors. The shift is underway but these things tend to start slow and then snowball. My guess is I wouldn't be surprised if 10 years from now that 2% becomes much larger.
Thanks for this. I'm currently in Acquisitions / Investments at a very reputable shop, close to MF-level and was thinking of a move to IR at some point.
1. What is your take on moving to a MF for IR where it might (presumably) be easier to raise money and having more structured IR teams (e.g sales vs product)
2. Given my experience was sector-focused in Acquisitions, does that put me at a disadvantage?
3. Coming in at the Associate / Senior Associate level, what kind are they really looking out for in terms of knowledge / in interviews?
4. I've heard from 2-3 data points that in a MF, Acquisitions and IR pay the same on an all-in basis. Any truth in that?
As primarily a product person who has dabbled in sales/coverage:
1. MF with good track record allows you to have more wins on your personal track record. A smaller name you have to do a lot more work to get the other person to pick up the phone. That said, at a smaller shop you get to provide a lot more input and have a more hands on role. Also be wary that larger, more "prestigious" names may have more onerous non-solicitation agreements which means a large universe of LPs is locked out for a long time when you move.
2. On the contrary, I've found the ability to speak intelligently on deals makes you invaluable on the IR side. As long as you're personable and can manage clients, you'll have a leg up over "pure IR" types.
4. Comp wise IR is a slight discount to deal side but very close. As you get more senior, my experience is that IR comp takes one of three approaches. Some places you get base + bonus and comp is on part with the deal side but without carry. Other places you get carry. And some places you have more of a placement agent type structure which is base + commission on capital you raise. I've only been comped on the first two structures but the third one is what I've heard from a good friend of mine who works in fundraising.
Hi! Very interested in IR- could you please PM me?
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