Fund placement: When money is not enough

The majority of private equity limited partners are currently awash with cash – latest figures from advisory firm Triago put 2016 annualised distributions at $420 billion, just down from $502 billion in 2015.

For top managers, securing commitments shouldn't be too much of a problem. That doesn't mean fundraising is easy.

“The yardstick is no longer just, 'Can you raise a fund?'” says Adam Turtle, co-founder of placement agent and advisory business Rede Partners.

Turtle, formerly at Actis and Credit Suisse, launched Rede with Scott Church, ex-Lazard and Merrill Lynch, in 2011. Having worked in investor relations, Turtle knew the real need wasn't access to LPs.

Since inception, the firm has grown from four people to 26 and advised on primary fundraising and secondaries worth more than €10 billion.

“The question isn't, 'Is there a role for placement agents in the world of investor relations people?' the question is, 'What is the role?'” says Turtle.

“If your answer is, 'It's providing access to the obvious LP universe', that alone is not something that a manager with a well-staffed investor relations team is likely to pay for.”

Rede provides a “toolbox of service offerings” to its clients, which includes assistance with storytelling, strategic thinking about new directions, preparation, distribution, LP insight, roadshow planning, feedback gathering and tactical campaign management. It also has a secondaries offering.

“Our objective is to be the number one advisor to general partners for everything they do that is LP-focused. To do that in this environment, you need to have a view on co-investments and secondaries as well as just traditional primaries,” Turtle says.

One of Rede's first clients was European mid-market firm PAI Partners, which was gearing up for its sixth fundraise. Forced to halve its previous fund after a management reshuffle triggered a key-man clause, PAI faced a tough road ahead. 

Getting the fund to a final close on €3.3 billion in 2015 proved a catalyst for Rede, says Church. “It made evident and reinforced our differentiation in terms of our service offering,” he says.

Fundraising, says Turtle, is “the ultimate complex process”, involving hundreds of moving parts. For hot funds, managing oversubscription and optimising the investor base are top of the agenda.

Rede has held final closings this year for Valedo, Verdane and Wise, and lists HgCapital as a current client. It also works with first-time funds and niche managers. In these cases, the hardest part can be getting them on investors' radars.

Rede's litmus test for all funds it takes on is, “Would we invest in it?”

The firm has grown to the point where Turtle and Church may start doing just that.

“We love the concept, it makes so much sense,” says Church. “It'll just reinforce the alignment that we're all about.”