Why Private Markets Managers are Prioritizing the LP Client Experience

Introduction 

In today’s competitive private markets landscape, managers are prioritizing an exceptional client experience for their Limited Partners (LPs), who now seek more than just attractive financial returns; they require transparency, personalized engagement, and seamless communication throughout their investment journey.  While a number of General Partners (GPs) have already embarked on this change in recent years, there is also a significant cohort of managers that have identified optimizing the LP client experience as a near-term priority investment. 

This blog delves into the drivers leading to prioritization of the LP client experience.  In subsequent blogs we will outline the technology and operating model components to consider when evaluating solution models options, the various categories of vendors, the components of the experience managers need to retain control over, and how to define and execute on a roadmap that delivers a best-in-class investor experience. 

The ‘Historical’ LP Experience 

From the initiation of the relationship to ongoing fund participation, LPs have historically interacted with a vast array of GP systems and processes, all of which are heavily disconnected. The LP’s journey often begins with accessing market research from the GP outside of any immediate need or specific fund interest. Later, once an LP expresses interest in investing in a fund, they are directed to a virtual data room to access the Private Placement Memorandum (PPM), information about the manager’s investment track record, management bios and other marketing materials. Upon commitment, the journey then shifts to an electronic subscription (eSubDoc) solution for completing documents, or even more frustratingly, the cumbersome and risk-laden process of printing, signing, scanning, and transmitting unsecured PDFs containing sensitive data.   

After making an investment, LPs again face fragmentation as they are routed to a separate investor portal environment to receive essential communications such as capital calls, distribution notices, quarterly reports, capital account statements, and tax documents.  In some cases, an additional portal is introduced for tax documents, and if the GP is using multiple third-party fund administrators, LPs are often directed to separate portals for each of the GP’s funds they invest in. Engagement in annual meetings typically occurs through yet another technology platform. This series of interactions across multiple platforms not only breeds confusion but also detracts from the LP’s overall experience due to the absence of single sign-on access, inconsistent branding and limited data access. 

3 Drivers Behind the Shift Towards Prioritizing LP Client Experience 

Growing LP expectations, the need for fundraising effectiveness, and the pursuit of cost optimization are leading many managers to reject the status quo as woefully inadequate and instead prioritize the LP client experience.

1. Growing LP Expectations 

Investors now anticipate a more cohesive and integrated experience that offers enhanced transparency and data access. Notably, they benefit from advanced self-service capabilities when allocating funds to public market managers, which raises expectations for transaction ease and information accessibility. As wealth and retail markets increasingly intersect with private markets, it’s evident that the technology used in private markets lags significantly. Additionally, LPs require access to fundamental data to effectively comprehend and manage their portfolio exposures. Consequently, pressure from LPs is compelling managers to provide a higher quality experience.  Furthermore, day-to-day use of modern technology has created an expectation of immediacy, ease of transacting, self-service, automation and accessibility, and is setting the bar for what consumers in private markets now also expect. 

2. Need for Fundraising Effectiveness 

Although it may initially seem that LPs are the primary beneficiaries of an enhanced client experience, GPs may actually stand to gain even more. The advantages for GPs include improved product distribution and cross-selling opportunities, faster fundraising cycles driven by increased efficiency and automation, and minimized risk through better adherence to security and compliance best practices. In the current private equity environment, GPs face considerable challenges as they vie for fundraising dollars while also working to attract and retain LPs. 

While, on the surface, client experience might seem to be primarily for large managers with multiple products to distribute, the uptick in M&A activity means that the competitive landscape can shift very quickly for mid-sized single-strategy managers.  Firms can inherit product distribution and client experience platforms from their acquirers, enabling them to leapfrog competitors and operate with increased fundraising effectiveness. 

GPs must also consider the various sales channels for institutional, ultra-high-net-worth, and high-net-worth investors while also considering intermediaries and retail avenues, all of which significantly impact their overall distribution strategies and operational requirements. The historical approach of engaging with LPs is no longer adequate when considering the broader growth aspirations of managers.  With a highly fragmented experience, GPs miss valuable opportunities to engage with a uniform and consistent brand, strengthen relationships with LPs, and effectively showcase their complete range of products. Building stronger connections, fostering trust, and accelerating capital-raising efforts requires a client-centric engagement strategy. 

3. Pursuit of Cost Optimization 

Disconnected technology solutions and manual tasks not only contribute to a subpar client experience, but they also result in a highly inefficient and costly operating model.  Redefining the client experience presents opportunities to consolidate technology spend and streamline client service workflows, ultimately leading to lower operating costs and a model that scales more effectively as the firm grows.  Optimizing end-to-end client service processes across marketing, investor relations, finance, operations and third parties is implicitly embedded within the architecture of an enriched client experience and inevitably leads to the most cost-effective operating model. 

How Private Market Firms are Responding 

While in the past implementing the integrated technology and operating model platform required to meet these needs has been complex — and therefore limited to the largest GPs — new capabilities available in market have put this in reach of a much wider range of managers.  Many GPs are now actively exploring digital-driven investor journeys and re-evaluating their operating model and technology stack as new platform providers bring capabilities to market.  By embracing a holistic approach that delivers a unified investor experience, GPs are elevating their engagement with LPs and positioning themselves as proactive partners while also improving product distribution, expediting fundraising cycles, optimizing client service operations, and reducing risk through improved adoption of security and compliance best practices. GPs recognize that delivering strong financial returns is just one aspect of a successful partnership with LPs and that focusing on client experience is equally vital for sustaining long-term investor relationships and securing future capital commitments.  

In our next blog post we will explore the components required to deliver a unified investor experience across people, process, technology and data and discuss the importance of developing a comprehensive vision for the LP client experience that prioritizes consistency, accessibility, and user engagement across all touchpoints of the investor’s journey. 

How Alpha Alternatives Can Help 

Alpha Alternatives provides managers with a comprehensive offering to redefine the LP client experience and has an extensive track record of enabling transformation for private markets managers and investors.  Key services include vision and strategy, branding, peer benchmarking, business case definition, operating model design, technology selection, implementation, and ongoing management and optimization. 

Contact us today to explore how we can support your transformation and help you stay ahead in an increasingly competitive market.