Mastering Client Services and RFPs for Institutional Investors: Emerging Trends and Alternative Investment Strategies that May Impact How You Operate

With the turbulent markets during COVID-19 impacting performance of much of the alternative investment industry, it is important that fund managers demonstrate their investment process is repeatable in all environments. That was one of the themes discussed at the Foundation Research Associates’ (FRA’s) virtual fifth annual Mastering Client Services and Requests for Proposals (RFPs) for Institutional Investors conference in a panel titled “Emerging Trends and Alternative Investment Strategies that May Impact How You Operate.” Other topics of discussion in the panel included trends in capital raising during the pandemic, what investors are looking for in proposals and the importance of diversity within an organization.

Panelists included:

• Alison Bray, Director, RFPs and Due Diligence, Baron Capital
• Kristin Carlin, CIO, FERN Impact Partners
• Dominic Ward, Managing Director, Iconic Holding
• Elana Margulies-Snyderman, Senior Manager, Publications, EisnerAmper (moderator)

Capital Raising During COVID-19

• Capital raising is clearly more challenging during the pandemic without in-person investor meetings, but the positive is, managers have secured more online meetings with potential allocators.
• Collectively, managers are leveraging their existing LP relationships more so than newer investor relationships, the latter deemed difficult without the ability for in-person meetings.
• Investor interest has ranged across the board from friends and family, family offices, and private banks to various institutional investors.  For the newer fund launches like FERN and Iconic Holding, it has been more friends and family and some family offices; while for Baron Capital, which has been around since 1982, it has been more institutional relationships.

Investor Requests in RFPS

• Investors’ requests in RFPs have drastically increased during the COVID-19 pandemic. Besides ensuring alternative investment managers’ investment processes are repeatable in all market environments, they are looking for other things as well.
• They have inquired how funds implement environmental, social, and governance (ESG) components into their portfolios.
• They have requested information on how firms address diversity within their organization (more below).
• They have asked what cybersecurity plans they have in place especially now that managers are working from home (WFH).
• They want to make sure firms have sound disaster recovery plans and succession plans in place. 
• Finally, the onus is on managers to anticipate what other requests investors will ask for in the future.

Diversity within an Organization

• Diversity within alternative investment firms has become increasingly important.
• Some investors require them to specify their gender and race breakdowns.
• Some firms have made diversity a top priority for recruiting efforts.
• For firms that have diversity in management and investment teams, they further mitigate risk by having diversity in geographic locations.
• And finally, some firms champion further diversification through their investment portfolios’ themes and positions.