LP Corner: An LP's Advice to GPs on Annual Investor Meetings

As an investor in private equity funds (primarily venture capital funds and mid-market buyout funds), I have been to many, many investor meetings.  I've seen great meetings, good meetings and some meetings that could have been better.  Over time, I've developed some thoughts on how private equity fund managers can improve GP-LP relations with their annual meetings.  Here are my thoughts for GPs as they plan their investor meetings:

1. Investor meetings are important for both GPs and LPs.  For LPs, this is our best time (and often only time during the year) to speak with several members of the investing team and to develop these important relationships.  For GPs, this is your best time to cement the relationships you have with your LPs in a very favorable environment.
2. Have an ANNUAL meeting.  There are some funds that have meetings on less than an annual schedule.  Many LPs conduct an annual review of funds and the underlying portfolio portfolio companies.  The best way to understand the firm, the funds and the underlying portfolio companies is by meeting with the GP on an annual basis.  
3. Have the meeting soon after the release of the audited financial statements.  As an LP, I want the best information I can get about the fund performance and the best information is soon after the release of the annual report.  April and early May are good months for investor meetings.
4. Invite ALL investors to the investor meeting.  As I mentioned, the investor meeting is the best opportunity an LP has to speak with several members of the investing team.  This is really critical for LPs to develop the relationships with the investing team and to understand the strategy better.  A GP that excludes an LP from an investor meeting because the LP is "too small" is sending a terrible message to the LP that they just aren't important.  That's bad for everyone.
5. The best days for annual meetings are Tuesday, Wednesday and Thursday.  Many LPs (especially foreign LPs) will travel long distances to attend the annual meeting.  Having to travel on weekends is painful for most people, and so scheduling investor meetings for Tuesday, Wednesday and Thursday helps with travel schedules.  Also, if you have foreign LPs, check the holidays for their countries before scheduling the annual meeting.  For example, if a US fund has several key LPs that are from France, these LPs may not be able to attend if the meeting is held on July 14, which is Bastille Day.  Once the meeting date is scheduled and invitations sent, don't change the date of the meeting unless it is an emergency.  Many LPs book non-refundable flights and hotels, and so will suffer economic losses if the date is changed.
6. Provide handouts and electronic copies of the meeting materials.  Provide LPs with printouts of the presentations for the investor meeting.  It is really helpful to have the presentations so notes can be written in the margins to add the color commentary to the slides.  It is this commentary that sometimes is really insightful.  Also, provide LPs with electronic copies of the slides, either on your website or on a USB key.  Some funds have in the past have not provided LPs with printouts or electronic copies of the presentations on the grounds of confidentiality.  However, LPs have signed confidentiality agreements either in the limited partnership agreement or separately, and GPs can have LPs sign a confidentiality statement at the investor meeting in order to receive the handouts.  Not providing handouts sends LPs a message that you don't trust us.  That's a bad message to send.
7. Provide substance over style.  I'm less concerned about activities and celebrity speakers than I am about learning about the firm's dynamics, industry developments, fund performance and portfolio company progress.  Dazzle me with substance and don't worry about activities and celebrity speakers.
8. Encourage questions.  Questions from the floor are often the best way to learn what is going on at the firm, fund(s) and portfolio companies.  Encourage questions during the presentations or open the floor to questions after each session.
9. Provide performance metrics.  What LPs want to know is how the fund is doing.  Providing net IRR information, multiple information and quartile performance helps LPs to understand how the fund is doing.  Also, have a discussion of the firm's valuation guidelines - when are discounts taken, use of comps v. DCF v. prior round valuation v. recent transactions.  All of these are helpful for LPs to understand how conservative the valuations are.
10. Give the bad news.  If the fund or portfolio company isn't doing well, address that in the meeting. Its better to address bad news head-on than hide it.
11. Firm overview.  It's really helpful for the GP to re-state the investment strategy and how the firm is situated in the industry.  It's also important to discuss changes at the firm.  Questions such as:  What are the firm's core strengths?  How does the investment strategy provide outsized returns?  How is the firm differentiated from its peers?  What has happened at the firm over the past year?  You'd be surprised that some firms neglect this important aspect of the meetings.
12. Industry overview.  I like to hear the partners' take on the industry - past, present and future.  It is very helpful to hear what has changed in the past year, how the environment is today and where the partners think the industry is heading in the future.
13. Fund review.  Provide a detailed analysis of the fund's performance and changes since the last year.  Fund performance metrics (see above) are key.  Also provide an assessment of the performance of the portfolio companies.  For private portfolio companies, metrics such as revenue and revenue growth, EBITDA and EBITDA growth, exit timing and type, comparable companies, etc. are all helpful for LPs to understand the performance and valuation of the portfolio companies.
14. Capital markets presentation.  It's also helpful to hear a capital markets expert (investment banker) discuss the M&A and IPO environment.
15. Portfolio company presentations.  I am a big fan of portfolio company presentations, especially when they are preceded by the responsible investing partner discussing the investment thesis and the deal.
    
16. Reception and dinner.  I'm also a fan of receptions after the meeting and sit-down dinners.  It's a great way for LPs to interact with the investment team in a more informal setting.
17. Ideal agenda.  Here's my ideal agenda:  

Agenda:

• Introduction and Firm Update.  An update on what has happened at the firm and funds in the past year.
  
• Industry Review and Outlook.  A review on developments in the industry over the past year, the current state of the industry, and projections for the future.
  
• Fund Update.  Performance metrics, calls, distributions, investments, portfolio companies review, etc.
• Capital Markets Overview.
• Portfolio company presentations.
• Reception and dinner.

I hope these thoughts are useful for GPs.  I welcome any additional thoughts from GPs or LPs on how investor meetings can be more productive.

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