Historically, the role of a Limited Partner (LP) has been to evaluate funds and make the best investments. 

However, as the LP landscape has grown more sophisticated, this dynamic has been turned upside down for the best General Partners (GPs). 

In today's competitive market, simply waiting for opportunities to come to you is no longer sufficient. For top-tier funds, you won’t even see a pitch deck if you are not proactive.

From Access to Insight: The benefits of Proactive LP-GP Engagement (LP 2.0)

LPs are increasingly recognizing the importance of cultivating strong relationships with GPs. Access to top-tier funds can significantly impact portfolio performance (especially in venture and buyout sectors where return disparities are more pronounced compared to credit and infrastructure).

As the investment landscape becomes more competitive, LPs must prioritize relationship-building to secure access to the best opportunities and drive superior returns.

While this development will require more from LPs, the good news is that technology is here to help. By leveraging tools like Investment CRMs, LPs can streamline their interactions and maintain a comprehensive view of their investment pipeline, ensuring they never miss critical fundraising cycles. 

1. Access to the Best Opportunities Translates to Better Portfolio Performance

It’s no secret among LPs that the difference in returns between the top-performing funds and the rest can be substantial - and much more pronounced than in public markets. Access to these top-tier funds thus becomes a key factor in driving overall portfolio performance. 

The best GPs are often oversubscribed, with LPs eager to re-up and new investors vying for a spot. By fostering strong relationships with these GPs, LPs can increase their chances of securing allocations in these high-demand funds. 

In a given year, 35-40% of GPs will have limited access

• In a “normal” fundraising year, approx. 5-10% of funds raised will be turning investors away at the door in a one-and-done fundraise. 
• Another 10-15% will largely have their investor base ready with a few extra spots. These will typically go to investors they have cultivated a relationship with over the years
• Finally, ~20% of funds will run a limited process, typically with a placement agent. In this instance, the placement agent primarily acts as gatekeeper in vetting LPs

The bottom line: The better your access, the better your portfolio’s potential returns. With a tool like FundFrame's Investment CRM, you always have an up-to-date view of all your interactions with GPs.

2. Price Competition is Low, but the Stakes Are High

“You get what you pay for” is generally a fact of life - but interestingly, less so within private equity.

One of the unique aspects of private equity is there’s generally little price competition among the top GPs. Whether a fund has a stellar track record or is simply average, the standard fee structure of 2% management fees and 20% carry remains consistent across the board. 

In every other fact of life we are seeing price variations and price discrimination. An iPhone costs more than most competitors and you pay extra for additional features. Besides some provisions for very large LPs, that is not the case for private equity.

The bottom line: With excess demand for these top-tier funds, even as fund sizes grow, building a proactive relationship with GPs becomes essential to ensure your spot in their next fund.

3. Access to Better Information and Ongoing Due Diligence

Being proactive doesn’t just get you a seat at the table; it gets you a better view of what’s on the table. 

By actively engaging with GPs early on, LPs can gain access to more detailed information and insights about the fund, the team, and their investment strategies. This can significantly enhance your due diligence process and increase your conviction in the investment. 

In addition, ongoing access to the GP’s team members and operations also allows for a lighter, yet continuous, due diligence process, keeping you informed and confident in your investment choices.

"A GP in a fundraise always have at least 3-4 upcoming exits"
A family office LP

Tracking and documenting these interactions in an Investment CRM is also a good way to ensure the GP delivers on their promises. Generally, they will tend to over-promise in fundraising situations (“we have 3-4 exits coming up”), whereas you can get the real story in between fundraises and track how this plays out over time.

The bottom line: Frequent interactions with GPs not only help secure an allocation, it also allows for ongoing due diligence and greater investment conviction.

4. Ensure you stay on your target allocation

For LPs, maintaining a proactive relationship with GPs helps in strategically planning their investment pipeline. Understanding when your top-choice GPs - say, in the healthcare sector - are likely to raise their next fund can help you make more informed decisions about current opportunities. 

For example, if you know a premier healthcare manager is launching a fund next year, you might hold off on committing to another healthcare manager this year, even if the opportunity is solid. 

This level of foresight helps LPs stay on track with their allocation goals and avoid overcrowding portfolios with investments in the same sector at the wrong time.

5. AGM Invitations and Networking Opportunities

Finally, proactive LPs are more likely to be invited to Annual General Meetings (AGMs) and other key events hosted by the GPs. 

These events are invaluable for networking, not just with the GPs but with other current LPs. Sharing notes, discussing fund performance, and gaining insights from fellow investors can provide a broader perspective on the investment and help refine your strategy. 

It’s an opportunity to deepen your understanding of the fund and the market, all while strengthening your relationships within the investment community.

Finally, it also tells the GP that you are willing to invest in the relationship, further cementing your seat at the table.

The bottom line: Attending an AGM with a prospective GP not only helps secure your allocation, it also allows you to network and build relations with other LPs.

How to stay on top of your GP relations

The evolving landscape of private equity demands that Limited Partners move beyond traditional roles and actively engage with General Partners. By leveraging tools like Investment CRMs, LPs can streamline their interactions, maintain a comprehensive view of their investment pipeline, and secure access to top-tier funds. 

With an Investment CRM tool like FundFrame’s iCRM you can easily map the market and stay on top of your pipeline and all interactions with a GP. You can click here to learn more and get started easily.

The bottom line: It’s said “the best opportunities rarely come knocking at your door - within private equity, it is no different.