The gatekeepers of institutional capital
Working with investment consultants undoubtedly adds an extra layer of time and effort to the fundraising process for fund managers, but the fact remains that winning the approval of these gatekeepers is key to cultivating relationships with many of the top institutional investors in the market.
While public pension plans are some of the largest allocators to private markets, and many have dedicated investment staff to direct allocations, they are often small teams that lack the resources to plan, diligence, select, and monitor a full private markets commitment strategy. As such, consultants are employed to assist in a varying number of roles – depending on the plan – and often employed as a governance requirement to ensure fair and unbiased decisions.
For fund managers this means that winning a new commitment from a pension plan sometimes means closing the deal twice: once with the client and a second time with the consultant. In the context of a single commitment, this added layer of diligence would appear to be a burden to fund managers, but when considering how many clients consultants have, the potential for additional positive recommendations to their client base makes the process well worth the time spent.
Understanding the consultant landscape
The challenge for many fund managers can be navigating the consultant landscape and understanding key questions like “who are the most influential in the industry?” and “who are specialists in the strategies my firm manages?”
Using our Nasdaq eVestment Market Lens platform, Nasdaq Private Fund Solutions regularly reviews the reported commitments made by public pension plans and notes when allocations have been made at the recommendation of a consultant.
We ran the numbers on commitments reported through the close of Q2 2023 and have compiled a list of the top consultants based on recommendations made through the first half of the year. This analysis help create a clear picture of who the most active consultants are within the public pension plan segment of the LP market, and who fund managers should focus on getting in front of as they work to raise their next funds.
All private markets strategies
Across all private markets strategies, Meketa Investment Group was the most active consultant in the first half of the year with over $5.4 billion in public pension plan commitments advised.
Meketa was followed by Hamilton Lane and Albourne Partners who advised on $4.4 billion and $3.25 billion respectively.
According to Nasdaq eVestment’s data, Hamilton Lane also recommended the most individual allocations by pension plans with 69 private markets recommendations in H1 2023.
Albourne Partners was responsible for recommending the single largest allocation to date in 2023, $1 billion from Washington State Investment Board (WSIB) to Fisher Lynch Capital.
|Meketa Investment Group
Rounded out the top five were Aksia ($1.85 billion) and StepStone ($1.55 billion).
It is worth reiterating that these figures only represent public pension plans’ commitments reported to private markets funds and are not representative of all the client types that the consultants serve, nor the full scope of the recommendations they make to other asset classes.
When looking exclusively at pension plan commitments to private equity, Meketa Investment Group again took top spot with nearly $3.5 billion in commitments advised. Meketa advised allocations to more than 20 different private fund managers with commitment sizes ranging from single digit millions to $600 million. These figures highlight the wide size range of clients they serve as well as the breadth of managers they research and recommend.
Albourne Partners’ $3.25 billion in private equity commitments advised matched their figure across all private markets strategies suggests that they are primarily focused on private equity when it comes to recommendations for their pension plan clients.
|Private Equity Consultant
|Meketa Investment Partners
Hamilton Lane had the greatest number of pension plan LPs advised of any consultant in the top five private equity consultants through the first half of the year with six plans. The consultant advised on commitments for Hawaii ERS, Louisiana Teachers, and Santa Barbara County ERS, among others.
Rounding out the top five within private equity was Mercer, who advised on 15 reported commitments totaling $923 million.
Meketa Investment Group takes the triple crown by topping the table for private debt with nearly $1.3 billion in pension plan commitments advised in the first half of 2023. Among the 19 reported recommendations Meketa made were two $300 million allocations from New Mexico SIC to HPS Investment Partners and Sliver Rock respectively.
Hamilton Lane also recommended an allocation the HPS Investment Partners, sized at $200 million for their client Louisiana Teachers.
Cambridge Associates took third place via $550 million in allocations advised for Florida SBA and $100 million for Kern County ERA.
|Private Debt Consultant
|Meketa Investment Group
After Meketa, NEPC recommending the second most private debt allocations in the period with nine. The consultant advised allocations from Boston Retirement System, Louisiana State ERS, and Ventura County ERA.
Callan rounded out the top five for private debt with six recommendations ranging in size from $10 million to $150 million for a total of $380 million.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.