Few would dispute that investment consultants can offer a vital advisory service to those seeking insights into how to commit to private equity in an optimal way. From suggesting an asset allocation model, through selecting specific funds and carrying out due diligence on those funds, consultants (or “gatekeepers” as they are sometimes known) are adept at steering clients through what can be a complex and confusing process – particularly for those investing in the asset class for the first time.
But when consultants begin mooting with clients the idea of raising a fund of their own, the suggestion may be greeted with concern. To the gatekeeper, entering the world of money management seems a good way of diversifying fee income away from individual advicegivers, who could theoretically jump ship to a rival organisation or even spin out and launch their own start-up in the same area of the market.
From the point of view of existing or potential clients, rather different priorities will be uppermost. They might be inclined to argue that potential conflicts of interest could arise between the advisory and fund management activities. Quite reasonably, they would require considerable assurance that, for example, the investment consultant's own fund (or funds) would not be recommended in preference to rival funds in situations where that decision would not necessarily be in their best interests. We examine these and other issues in our investment consulting special feature, beginning on page 50.
If you are in the cynics camp when it comes to the merits of combining advisory work with fund management, your view might be challenged by reading our feature on Hamilton Lane (page 54). Perhaps this particular firm is trusted with such a strategy because of its impressive determination to make the asset class as transparent as it possibly can. Clients will always appreciate efforts to tell things as they really are.
Enjoy the issue,
Philip BorelManaging Editor