As the need for capital increases in Europe, understanding investor expectations is more crucial than ever. What are they looking for in opportunities presented to them? How are they navigating the diversity of products? What lies at the core of long-standing investor relationships? Manuela Froehlich, Head of Fundraising & Investor Relations at ALIGN and Co-Founder of FONDSFRAUEN, shares over three decades of experience to help us navigate the current landscape.
Key takeaways for issuers:
- Resilience beats upside. Investors prioritise downside protection over high returns. Show how your strategy holds up in worst-case scenarios.
- Liquidity is the bottleneck. Many investors are frozen, stuck between delayed exits and uncommitted capital. Offer flexible terms that ease liquidity concerns.
- Communication builds trust. Be proactive and honest, especially during downturns. Silence when things go wrong is the fastest way to lose investors.
What's shaping investor expectations?
Investor desires have remained relatively consistent over the years. They continue to focus on risk management, albeit the context in which they operate has changed significantly. Portfolios are now fuller, liquidity is often strained, and there is less enthusiasm for first movers. Traditional investors, such as institutional investors and family offices, show a preference for established paths over emerging managers due to perceived risk reduction.
Resilience: A core concern
Resilience has become the industry's key focus. While past discussions highlighted potential returns, the current dialogue centers on risk management and protective measures. Specifically, liquidity, refinancing risks, concentration risks, and hidden correlations are critical concerns. Froehlich cited private credit stress, noting that investors previously believed they had diversified the debt portfolios, only to discover unsettling concentration risks.
What are the challenges in private credit investing?
Private credit managers find themselves in a unique position where many investors hesitate to commit due to unpredictability. Some investors postpone investments altogether, lacking the necessary capital calls to proceed. Investors feel caught between needing to avoid liquidity problems and waiting for more concrete market signals.
What's the secret to enduring investor relationships?
Success in the investment world still hinges on human connections. Trust is the most valuable form of currency, cultivated over time through authentic representation of investor interests. Communication is paramount, particularly when market conditions deteriorate. Anticipating investor concerns and maintaining transparency fosters trust and strengthens relationships.
For example, during the COVID-19 pandemic, showing resilience and stability was paramount. ALING's media finance strategy navigated these tumultuous times with foresight and an adaptable approach that guided investors through uncertainty.
Despite technological advancements and data transparency, investment remains a deeply personal business. The ability to anticipate, communicate, and build genuine relationships continues to be the cornerstone of long-term success.
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