The 3 things an emerging manager needs in order to successfully raise a fund: people, strategy and a track record

With more private funds launching than ever before, the competition for commitments from LPs has never been tougher, especially with so many larger GPs back in the market frequently with successor funds and new offerings. In all of our conversations with professional investors that allocate to emerging managers, three key focus areas consistently come up:

The people

• How long have the partners and team worked together (including at other firms)?
• What experience to each of the key partners and team members bring to the fund that contributes to the delivery of the strategy?
• How is compensation (and specifically carry) distributed between the partners and to the team?

The strategy

• What is the investment thesis and why is it different?
• How has the strategy performed during different market cycles?
• What is the strategy for deal origination? How proprietary and / or defensible is it?

The track record

• What is the evidence that the strategy works and that the team can deliver it?
• What realizations have the team delivered at this firm from prior funds or deal-by-deal investments mirroring this strategy?
• What deals have the team delivered from other funds / firms?

Any GP bringing a fund to the market (emerging or not) should be able to speak to each of the points above in detail and to provide the necessary evidence when requested to back up the story. If an LP can't get comfortable with the above, it will be much more difficult for them to underwrite a potential commitment.