After capturing a record-high $2.49 trillion of assets under management (AUM) in June 2016, the private equity industry finished the year on a strong note, with 830 funds raising $347 billion, according to industry research firm Preqin
1. Pitchbook, an analytics provider for the alternative investment industry, and a Preqin competitor, found that 356 of these funds closed in North America and Europe, while averaging roughly $765 million in fund size. Probing deeper, Preqin’s 2017 Global Real Estate Report identified 225 private RE funds that raised $108 billion last year 2. The average size of private RE funds in 2016 was $499 million. Additionally, the 525 RE funds seeking a record capital target in 2017 comprise roughly 29 percent of the total 1,829 PE offerings being shopped in a cramped market, sitting on $820 billion of uninvested dry powder.
As limited partners increasingly concentrate their PE allocations into larger funds managed by reputable general partners, a focused B2B marketing strategy has become mission-critical for GPs of all sizes and specializations. Consider that in the RE sector alone, the 10 largest funds captured 36 percent of all investor capital. According to consulting firm Bain & Company’s Global Private Equity Report 2016:
“Bigger brand-name GPs have far greater marketing heft than their smaller rivals and bring to bear their substantial economies of scale, offering a broader array of funds to absorb more capital from LPs looking to pool their commitments with fewer PE firms.”
Fortunately, social media outreach, powered by new marketing technologies and information management systems, has leveled the playing field for branded communications, investor engagement, and client outreach.
Today’s social platforms and nimble, digital tools enable smaller GPs to reach LPs and potential sellers of target assets as efficiently as their larger and better-funded rivals. While past performance continues to weigh heavily on LP fund selection, the main challenges for smaller GPs are the authorship of a compelling brand narrative and the conception of a strategy to disseminate that message.
For an industry that has historically promoted itself through relationship-based marketing and positive financial media coverage, the digitization of brand-messaging may seem non-essential. But in the current PE cycle, GPs that embrace the digital mesh will achieve improved funding, investor relations and ultimately, a better return on investment into their brand and marketing program. The ROI benefit is particularly evident in an extended PE lifecycle, with 76 percent of managers saying they typically hit their funding target in between nine and 18 months
3, according to Mergermarket.
In 2017-18, every GP should incorporate the following B2B marketing best practices: design a search-engine-optimized and responsive, mobile-first website; establish a social media presence; dive into content marketing; automate marketing functions; and deploy an integrated, multi-channel strategy.
It’s important to note that these B2B principles are meaningless unless GPs conduct a thorough a brand assessment to define, in a clear and compelling manner, who they are and what they do. Marketing budgets will not be effective without a resonant and easy-to-digest storyline guiding the process. Further, Preqin and Pitchbook have become mandatory platforms to advance GP brand curation and communicate their value propositions to LP investors.
DG Journal will publish additional insights on the evolving landscape of fund branding and communications in coming editions this summer and fall.