In an increasingly challenging fundraising landscape, General Partners (GPs) are deploying all available resources to create value and maintain a competitive edge.
Consolidation is the name of the game. The largest private equity fund managers are consolidating the majority of total investment capital into the top 30 global funds, making it more difficult for small and mid-sized managers to attract new investment.
Now more than ever, GPs must focus on operational efficiency and the significant imperative to stand apart from the competition in a crowded marketplace. In this post, we’ll explore how fund managers can sharpen their competitive edge with a remarkable investor experience.
Why investor experience matters
The 2024 Global Private Equity Report from Bain and Company revealed that the amount of capital raised in 2023 was the lowest the industry has seen since 2018, down 20% from 2022 totals and almost 30% off the mark from an all-time high in 2021. The fundraising environment has never been so challenging. GPs are chasing a limited pool of capital and must have value levers that will differentiate their fund from others.
Consolidation is another trend putting pressure on new and medium cap funds. The 25 largest fund managers captured over one-third of the capital allocated to private equity in 2023—a trend that’s expected to continue through at least the next year, according to an EY pulse survey.
By placing investors at the centre of their processes and simplifying access to funds, GPs can significantly enhance their appeal to liquid investors with limited choices. And most funds are getting it wrong; according to a 2018 study from PwC, there is a 19% gap between investors’ expectations about their experience and the experience itself.
COVID-19 has only widened that gap, raising investor expectations of their digital experience higher than ever. Our recent collaborative survey with The Drawdown showed that 32% of investors now expect onboarding to be a digital process, signalling that the slow rate of digitisation has not gone unnoticed.
A positive investor experience can function like a magnet, attracting investor commitment to future funds. Human psychology is remarkably consistent in this way; we all seek out and return to high-quality experiences that place us at the centre of their value delivery chain. Just as consumers return to retailers, restaurants, or even their other GPs (their doctors) thanks to a positive experience—or never return after a negative one—investors are more likely to commit to GPs who offer a seamless and enjoyable experience from start to finish.
Enhancing investor experience with onboarding technology
Against the backdrop of a challenging fundraising landscape, Bain and Co’s private equity report reveals that GPs are reassessing their communication strategies with Limited Partners (LPs). This shift is worth noting, as GPs traditionally haven’t emphasised such communication, relying instead on informal discussions about individual portfolio companies. GPs are now strategically identifying target LPs and enhancing their capabilities to understand and cater to their needs, a strategy akin to that of a sophisticated B2B sales organisation.
Technological adoption toward digital-first experiences and ready access to centralised data are key in that shift. Most GP-LP touchpoints are now fully digital, from investor onboarding to exit. Each touchpoint offers an opportunity to impress or disappoint investors, attracting or deterring capital at critical moments in a fund’s lifecycle.
This experience starts with investor onboarding, a complex end-to-end process that can feel clunky and outdated if done manually. Multiple emails, manual forms, and redundancies are not an effective use of time for LPs or GPs—and if investors see your processes as inefficient or outdated, these methods can irreparably damage your reputation and your chances of securing capital.
The solution: onboarding platforms that prioritise investor experience. LPs expect a smooth onboarding experience with minimal data entry, facilitated by digital platforms that automate and clarify every step. Onboarding technology also benefits GPs, who can save time, reduce costs, and increase onboarding efficiency while leveraging technology’s capacity to mine large quantities of data and mitigate risk.
A comprehensive onboarding platform automates each step, making the process simple for investors to complete. The best platforms also flag missing information, store data in one centralised location, and auto-populate information based on a single entry, reducing the risk of manual input errors.
