New relationships: A lockdown no-no

Maybe it is the thought of lockdown easing, but some investors are adamant they’re unlikely to make a fund commitment unless they have sat in the same room as the manager. In a discussion last week, three investors all discounted the idea of a fully remote due diligence process. Alisa Mall, director of investments at the philanthropic foundation Carnegie Corporation of New York, said while her team had discussed amending its new manager policy in the current environment, it would be difficult to embrace a new fully remote process: “It’s the equivalent of getting engaged to someone you’ve only talked to on your screen. These are big commitments, and most are illiquid.” Investment professionals from investment consultant Meketa Investment Group and Oregon State Treasury both said they would be unlikely to commit to a manager they had not met.

Another interesting takeaway on covid-era fundraising: having a seeded portfolio of assets used to be an important plus for first-timers. It allowed potential investors visibility into the strategy and the GP’s ability to execute. Now it’s a hindrance: “Overnight it was, ‘I don’t want your seed portfolio, it cannot possibly be worth what it was when you purchased it, and why would I buy into a pool of existing assets?’” said Christy Gahr, a principal at Meketa.

PERE subscribers can read Kyle Campbell’s report in full here. Thanks to investment management software provider Juniper Square for hosting the webcast.