Transparency continues to be a source of frustration for investors in the alternative investment space. In a recent LP survey issued by Northern Trust, more than 60% of investors ranked transparency as the most important factor in determining investment consideration. For GPs, transparency is a source of confusion, given the many ways to tackle the issue – for instance, using ILPA templates versus taking an individualized approach.
Last week at Intralinks’ AI Insights Briefing, panelists Meghan McAlpine, Director of Product Marketing, Intralinks and James Williams, Managing Editor, Global Funds Media, opened up a discussion with fund managers to shed light on the transparency discussion. Many of the insights gleaned from the conversation challenged current misperceptions, and can be used to inform LP communication strategies moving forward.
1.“We’re seeing more transparency, but less satisfaction.” – Williams
Intralinks data shows that, compared to three years ago, investors report an increase in the level of transparency from their fund managers; however, satisfaction with that transparency has decreased. These findings suggest that fund managers are missing the mark. Fund managers don’t always know what their LPs are looking for, and in what format. There’s still a long way to go to bridge the gap in expectations.
2.“More transparency doesn’t mean more data.” – McAlpine
LPs are getting overloaded with data. One LP stated, “Most of our GPs want to provide us with more communications than we even need,” suggesting that fund managers are “just trying to keep the consulting community happy.” Too much data – i.e., throwing everything at the wall to see what sticks – can send the wrong message to an LP.
3.“Communication is key. Talking with your LPs and getting out in front of any negative news or how you handled a deal that went south…” – McAlpine
McAlpine noted that frequent touchpoints with LPs along the way can give fund managers a leg up. This means more than the formal monthly or quarterly reporting. Casual, face-to-face check-ins, letting the investor know where you are with a deal and what you’re struggling with, can help to build credibility and trust.
4.“You want to level-set with your LPs from the beginning; it’s ok to push back.” – McAlpine
Gauge investor expectations from the start, and be upfront with them about your firm’s capacity to respond to those expectations. Fund managers who are open with investors will begin to develop an honest partnership. It’s better to push back on some of the requests, rather than over promise and appear unresponsive down the road.
5.“Surprisingly, not as many LPs are asking for ILPA templates.” – Williams
Despite the push for standardization, Intralinks data suggest that most LPs aren’t asking for ILPA templates (only 30% of respondents said they their GP to use ILPA). Fund managers need to get a better understanding from their LPs on where they want transparency and meet their needs that way, rather than providing a blanket template approach.
Want more insights around transparency? Check out “The LP blueprint: Insights on alternative investments.”