Don't get "stuck in the middle."
A recent Institutional Limited Partners Association (ILPA) white paper highlighted the tensions and concerns that institutional LPs are having over the race for "retail" by alternative asset managers.
Balancing the needs and demands of both institutional and wealth channel LPs is a question that’s moving to the forefront of conversations between GPs and LPs as the industry evolves to cater to the needs of the new, relatively untapped LP: the wealth channel.
Institutional LPs are wondering how GPs that decide to work with the wealth channel will handle the influx of capital from private wealth and what that means for their own relationships with GPs.
Scott Ramsower, Head of Private Equity Funds at the $221B AUM Teacher Retirement System of Texas, said this topic is “is top of mind for limited partners.”
Institutional Limited Partners Association (ILPA) then said the quiet part out loud.
"More pointedly, ILPA elevates these issues at a time when the underlying mix of investments of these products may exacerbate a strategy-structure misalignment ..."
Reorienting an asset manager to be able to properly serve the wealth channel requires capital, commitment, and comprehension.
Perhaps the most important “c” for firms to internalize? Comprehension.
Asset managers will do well to comprehend the nuances of balancing the needs of both the wealth channel and their long-standing existing customers, the institutional LPs.
EQT Group CEO Per Franzen said it well when he remarked recently that responsible growth is critical: “If I had a magic wand, I would use that and make sure that every larger player in the private markets industry pursues that opportunity in a long-term responsible way.”
Responsible is the keyword here.
With people’s retirements hanging in the balance, it’s never been more important to get retail right.
If asset managers — and the industry — want to be successful, they can’t afford to get “stuck in the middle” of not serving either institutional or wealth channel LPs well.
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