A New Fundraising Frontier: Levers for Growth in Private Markets

Introduction

The alternative asset management industry is navigating considerable change and new realities. Despite a track record of delivering strong returns, managers face a fundraising environment marked by elongated timelines, muted commitments, and a cautious institutional investor base. Geopolitical tensions and economic volatility further complicate the picture, tempering optimism even among the most prominent firms. Fundraising cycles for managers now average 19 months according to data from Buyouts, a significant increase from pre-pandemic norms, while institutional limited partners (LPs), such as pension funds, grapple with allocation caps.

Yet, headwinds bear opportunities. The retail wealth channel is expanding rapidly and the appeal is simple. Individual investors hold roughly 50% of global capital. Those same investors represent just 16% of AUM in alternative investment funds, according to Bain & Company. Managers are rapidly constructing evergreen vehicles and retail-oriented products to capture this market. Growing demands for liquidity from institutional LPs has driven the robust growth of the secondary market, which recorded a transaction volume of $160 billion last year according to Evercore, and is expected to maintain its strength this year.

Success hinges on rigorous education. Managers must effectively explain the benefits, risks, and structural nuances, such as liquidity and tax considerations, to an expanding investor base.

The current macroeconomic environment, characterized by stubbornly elevated interest rates and geopolitical uncertainty, has made fundraising more challenging. Firms must address investor hesitancy and articulate compelling value propositions. Digital technologies are changing how managers communicate with investors, distribute information, and manage relationships. Firms must embrace new tools to enhance efficiency and reach a wider audience. In a crowded market, firms will find traction by articulating a clear and compelling investment thesis, showcasing a strong track record, and building a distinctive brand. Firms must provide clear and comprehensive information about their value creation strategies, performance, and risk management practices.

This analysis will explore how alternative asset managers can activate business development, marketing, and client service, informed by industry leaders and best practices, to navigate these complex dynamics.

Securing Committed Capital

Effective business development is key to scaling growth for any alternative asset management firm and today’s private markets demand proactive and adaptable efforts. Competition for capital is intense, and firms must build robust pipelines for investor outreach.

Firms are cultivating relationships with institutional LPs, family offices, high-net-worth (HNW) individuals, and an expanding retail investor base, tailoring their pitch to diverse priorities like scale for pensions, legacy for families, or accessibility for retail.

Capital deployment from institutional LPs has slowed compared to the past five years. Proskauer says that in this climate, investors of size are pushing for better overall economics, and managers should be prepared to justify certain terms, whether fee or carry structures. Managers are recognizing the need to expand their investor base beyond traditional pools of capital. This includes offering new products like evergreen funds with lower minimums and periodic liquidity to broaden accessibility. Additionally, investors are drawn to private markets due to the decline in the number of listed equity investments available and as promising companies stay private for longer.

During the last cycle, managers relied on market multiple expansion and leverage to drive returns. The playbook for the next decade is likely different as financial leverage gives way to operational leverage and higher financing costs dampen leverage’s utility. In this new environment, transparency around operational strategies and the ability to articulate tangible value creation will be critical for success. A strong brand associated with operational excellence can help to bolster fundraising efforts.

Together, family offices (FOs) and private principal investors (PPIs) control upwards of $6 trillion in assets, representing about 10% of all private markets. Their close ties to the entrepreneurial world often give them an edge, allowing them to source investment opportunities that other investors may not know about. FOs and PPIs are well-suited to make long-term bets. They can fund emerging technologies and address large-scale issues like climate change that require massive amounts of capital but generate limited returns in the short term.

They have the staying power to weather extended investment periods, holding positions until the optimal moment to buy or sell emerges. This patience enables them to seize possibilities that investors with shorter horizons cannot. Yet, today’s unpredictable climate is muddying the waters for investment choices and impacting existing holdings. Asset owners and managers are recalibrating their asset class allocations, risk tolerance, and strategic approaches within each category to align with this shifting reality.

Market Presence Amplification

Effective marketing drives brand awareness, generates investor interest, and sets a firm apart from its peers. Traditional linear funnels are evolving into dynamic influence maps, reflecting the complex decision-making process in investor fundraising. This shift demands tailored content that guides investors from awareness to commitment, acknowledging the complexity of their choices with nuance and precision.

Demographic shifts underscore the need for adaptability. According to BCG, mass-affluent and high-net-worth individuals are projected to control a significantly larger share of investable assets, necessitating targeted digital engagement. Younger generations prioritize authenticity and digital fluency, requiring firms to refine their branding to meet evolving expectations. Over 70% of investors now conduct initial research online before engaging with a manager, according to AIMA surveys, demonstrating the critical importance of a strong digital footprint. Managers with strong online presences consistently outperform peers in capital raised, highlighting the measurable returns of a robust marketing strategy.

Digital channels, including social media, email marketing, and search engine optimization, are crucial for expanding reach to diverse investor pools. A cohesive digital strategy, aligned with broader business objectives, ensures these tools connect efficiently with target audiences. Maintaining an active and authentic social media presence builds brand visibility and nurtures investor relationships, provided it reflects the firm’s values and speaks directly to its intended stakeholders.

Compelling fund materials, such as pitch decks and investor presentations, are essential for conveying investment theses and performance records with clarity. These should be concise, visually engaging, and customized to address specific investor needs, balancing data with storytelling. Regulatory updates, like the SEC’s Modernized Marketing Rule, further enable innovation, permitting testimonials and hypothetical performance with appropriate disclosures to broaden appeal.

Consistency remains critical. A unified narrative—rooted in expertise, scale, or alignment with investor goals—must resonate across pitchbooks, digital platforms, and thought leadership efforts. High-quality content, including white papers, research reports, and blog posts, positions a firm as an industry authority. These materials educate prospective and current investors on strategies, market dynamics, and performance insights, shaping trust and deepening engagement. Tracking metrics like website traffic, content downloads, and social media interactions provides a clear, data-driven measure of impact and helps refine future efforts.

Educational content marketing works because it builds trust and establishes authority, directly impacting client engagement and conversion. By providing valuable, educational resources, asset managers empower clients to make more informed decisions, fostering stronger relationships and ultimately driving higher conversion rates.

Handshakes and Headspace

Exceptional client service is essential for building enduring investor relationships, fostering trust, delivering tailored support, and sustaining loyalty in the complex realm of private markets. According to PitchBook, funds with strong investor relations experience a 15% higher re-up rate compared to those with poor investor communication. In an industry defined by illiquidity, long horizons, and high stakes, the ability to instill confidence through consistent, transparent, and responsive engagement is a necessity. Firms must prioritize communication that bridges the gap between intricate investment strategies and client comprehension.

Trust begins with transparency, taking the form of timely and detailed updates on investment performance, portfolio developments, and market conditions. Regular reporting, whether quarterly, monthly, or ad hoc, should distill complex data into clear and concise insights, avoiding jargon while preserving depth. A Preqin report indicates that 82% of investors cite transparency as a critical factor in their manager selection. This clarity empowers investors to assess their positions, understand risks, and anticipate outcomes. Beyond raw numbers, contextualizing updates with market trends or strategic rationale demonstrates foresight, signaling that the firm is not merely reacting but actively stewarding capital through shifting landscapes.

As private markets evolve, marked by longer hold periods, delayed exits, and heightened scrutiny, proactive engagement becomes paramount for sustaining investor interest.

When distributions slow or market volatility spikes, silence breeds doubt; regular touch points, by contrast, maintain momentum. These might include virtual webinars, detailed outlooks, or interactive portal tools that let investors explore at their own pace.

The structure of communications define service quality over time. A disciplined cadence ensures updates are neither sporadic nor overwhelming, striking a balance that respects busy schedules while delivering substance. Formats matter too: static text-only reports might suffice for some, but interactive PDFs, secure portals, or dashboards cater to a digital-first world, enhancing accessibility and engagement.

The stakes of this approach are tangible. Firms that prioritize proactive, high-quality service retain significantly more investors across fund cycles, often preserving billions in capital, compared to those reacting only when prompted. This retention gap reflects more than goodwill; it’s a financial imperative in an era where re-up commitments drive scale and stability.

Key Takeaways

• The alternative asset management industry is facing headwinds due to elongated fundraising timelines, muted commitments, and a cautious institutional investor base, exacerbated by geopolitical and economic volatility.

• The expanding retail wealth channel presents a significant growth opportunity, with estimates indicating substantial growth in advisor-intermediated illiquid alternative assets.

• Firms must embrace digital tools, including social media, email, and content marketing to enhance efficiency and reach a wider audience, especially younger and mass-affluent investors.

• Building a strong brand, articulating a compelling investment thesis, and delivering high-quality, consistent marketing content are essential for attracting investors and differentiating in a crowded market.

• Exceptional client service, characterized by consistent, transparent, and responsive engagement, is paramount for building enduring investor relationships.

• The industry requires adaptability to changing investor demographics, regulatory updates and evolving investor preferences.