Our giraffe asks Tom about IR
Posted By: Tom Quinnen on Thu, 9th Jul 2015
What does the title Investor Relations (‘IR’) mean to you?
For me IR is the person or people responsible for maintaining relationships with existing investors (LPs) and managing the re-up and co-investment process. An Investor Relations professional should possess strong technical know-how and the ability to understand investments however, the role is first and foremost about relationship management. Of course, there is an element of sales within the role but there is far more to it than that. It requires an individual with empathy and a real understanding of how to build long lasting relationships. A pure IR role contrasts quite distinctly with a pure Fundraising role where someone is principally tasked with raising money, whether from existing investors or new ones.
How has the role of Investor Relations changed and developed over the past decade?
The change has been pretty fundamental and continues to evolve today. We are all now familiar with the fundraising environment post-Lehman and the extraordinary events following the financial crisis that catapulted Investor Relations from where it was, in some cases, almost a back or mid-office role to its position now, on the front-line. That is not to say that some firms did not have strong IR teams in place at the time however, there has been a tremendous shift from the traditional view of a more marketing type of function to an integral part of a private equity firm.
One of the most notable changes has been the amount of technical ability now required by an IR professional. Whilst I would stress that plenty of IR teams already possess this expertise, the change now is that LPs are requesting substantially more information and at a very granular level. In addition, the role is now one that sees the IR person acting as the eyes and ears of the LPs, at Investment Committee meetings for example - providing input both to the investment teams and investors. Overall, the role of the IR professional should be on a par with the investment team – raising capital is clearly the life-blood of a private equity firm – and, without this flow, as we have seen, firms cannot survive.
As a head hunter specialising in this area of the market what skills and experience are your clients looking for from an IR person?
Perhaps unsurprisingly, each mandate we work on brings with it a slightly different nuance or requirement from our clients. Overall, as you might expect, it is about cultural fit – someone who will fit into the existing team and become a key member of that team going forward. The actual skills and experience will vary on the particular emphasis of the role however, first and foremost, individuals should have a robust understanding of the asset class. If the role is one solely focused around fundraising – then an individual with a proven track record of raising PE assets together with an extensive rolodex of contacts will be a pre-requisite. If the role is more focused around IR, or indeed the individual will be the sole IR representative covering both IR and Fundraising, then there is a requirement for both sales and relationship management skills together with a strong technical ability in order to disseminate portfolio update information to investors, manage the reporting process and so on. Interestingly, a number of clients are now asking for existing IR experience as they see this as vital as they grow and develop their IR offerings.
From your experience, what advice are you able to give to people considering a career in IR in private equity?
IR offers a really superb opportunity for individuals with strong technical skills married with excellent interpersonal skills and a genuine interest in the private equity asset class. The route to Partner is far more common now and the role offers an excellent opportunity to really become a lynchpin within the firm. In the first instance, candidates need to determine if they ultimately want to be a pure IR professional or focus more on a Distribution/ sales type role. Both offer excellent career paths however it is important to recognise that the IR role does combine exposure to the underlying portfolio investments (something that is unique to private equity) together with relationship management and sales. One of the most common questions I am asked, even today, is “what happens when the fundraise is over, what does an IR person do?”. My response is that the moment the fund is closed, work starts on pre-marketing for the next fund – you may not be actively marketing but you will already be laying the groundwork for the next fund and thus taking a pivotal role in the firm’s future ability to raise capital.
Given the relative youth of the industry, there is something of a scarcity of talent at the mid to senior level of IR professionals and it is therefore very positive to see candidates with investment banking, legal or accountancy backgrounds joining the industry at the more junior level, providing an excellent talent base to grow and develop. These individuals need to bear in mind that it can be difficult to go straight into a distribution role without having had IR experience or indeed project management experience with a placement firm. A lot of candidates I meet are super-keen to get out on the road, meeting prospective investors and selling but in order to do this successfully, it is vital that they spend time within IR learning about the underlying investments, meeting existing investors and understanding their needs – as well as working through a fundraise and getting to grips with the different elements of this process.