After performance, what do limited partners look for in a general partner when considering whether to commit to a fund?
David Enriquez, head of private equity for New York City Retirement Systems, shared his thoughts at the IPEM conference in Cannes on Thursday. Here are three key takeaways.
GPs should be responsive and commercial
For a pension system such as NYCRS that doesn’t have a co-investment programme, finding ways to make its fund commitment worth more than its face value is crucial, according to Enriquez. NYCRS, which manages more than $200 billion for five New York City public pensions, is “always trying to negotiate the best fee structure” as it is a large pension plan, he said.
“Private equity funds exist because we as LPs invest capital that is the lifeblood of the industry,” Enriquez said. “GPs sometimes need to be commercial – not that they always have to change, but at least always be responsive.”
Enriquez gave the example of a GP who extended the time needed for advisory committee consent on an investment issue to three weeks, and allowed its limited partnership advisory committee to hold conference calls without the GP being present.
“There are some GPs who will listen and hear us out,” Enriquez said. “I think it’s matter of just engaging.”
NYCRS asks every manager it commits to about diversity at the firm level, investment committee level and portfolio company level when conducting due diligence. While it doesn’t have specific targets GP must meet, the pension system feels it should set the standard for other public institutional investors.
“As a large highly visible plan, we’re demonstrating to our GPs that this is something important to us,” Enriquez said.
Diversity is a competitive advantage that can be compared with having an operations team, he added.
“Maybe it’s 10, 15, 20 years from now, we’re going to see diversity better addressed when some of the organisations that don’t recognise it see [its value],” Enriquez said.
Since 2015 NYCRS has not committed to a GP who has not agreed to provide reporting compliant with the Institutional Limited Partners Association’s template, Enriquez said.
“As a highly visible public pension plan, we think our size can help promote that for our own benefit as an LP but also for the industry,” he added.