LP Confidential: Top Tips for AGMs

In our new feature, private equity limited partners share unfiltered, “off the record” views on all things alternatives.  

This installment  focuses on annual meetings—specifically, what drives LPs crazy about them.  It’s particularly relevantintelligence today as most GPs are shifting to virtual formats in a post-COVID world. 

Below are some of the key takeaways from the LP interviews on AGMs, which we hope offer valuable guidance, whether you are looking ahead to your next physical AGM or planning a digital event:

Avoid an information death march

Sure, LPs want information about projected returns, portfolio companies, CEO views, market dynamics. But they want thoughtfully selected information that gets to the heart of what makes the firm unique, not an endless procession of facts and figures marched across a screen in an aggressive display of transparency. 

“What I find most annoying is being drilled into the ground with a bunch of statistics,” says an LP who says he attends some 12 to 15 AGMs per year. “Sometimes it’s so long and detailed, you just get worn out. I need more of an overview – how was the last year, what worked, what didn’t work?” 

Another LP agrees and says that oftentimes the more important message around culture and “reason to exist” gets lost amid hundreds of slides. He says the AGMs that he favors tend to start with the senior-most partner giving an overview, not a recitation of the day’s sessions and activities. “It is sufficient to provide the schedule ahead of time,” he says.

One challenge faced by GPs is that some LPs are more exposed to specific portfolio companies because of co-investment. One LP suggested that breakout sessions be created for each co-investment so that participating investors can receive more granular information and ask questions, while LPs without the same level of exposure might choose a different learning or networking opportunity. “Let LPs choose their own adventures,” said the LP. 

Don’t simply read from your slide deck

Increasingly, LPs are receiving details about the fund and firm ahead of time. They see the AGM as an opportunity for further commentary, asking questions and networking with GPs, LPs and sometimes CEOs. 

Because of this trend toward separately provided information, nearly all the LPs mentioned this pet peeve – GPs who get on stage and read information nearly verbatim from a deck. If, for example, your deck shows that a portfolio company’s revenue is up 10 percent, you don’t need to tell your LPs that revenue is up 10 percent. Instead, spend thetime explaining why this is important for them to know (if indeed it is). Likewise, if team member Brad became a partner last year, and there is a slide explaining this, you should think of something more insightful to say on stage beyond, “Brad became a partner last year.”

GPs who have spent many hours creating charts for the AGM sometimes become so enamored with them that they can’t help but laboriously walk the audience through each one. “The whole purpose of a chart is, you can send it and I can read it,” says an LP.

Based on several LP interviews, the “ultimate nightmare” AGM is one in which hundreds of pages of slides are read aloud to investors over the course of several hours with no context as to why it is important for the LPs to absorb all this information in a live setting. 

Beware the unshackled CEO

While it is true that LPs do want access to portfolio company CEOs, this desire does have limits. Some LPs interviewed said that too many CEO presentations amount to cheerleading sessions for the companies they lead. Furthermore, a CEO presentation about what a company does runs the risk of leaving out the all-important details of why the GP liked the sector, came up with a thesis, and whether that thesis is born out by the company’s performance.

Finally, there can be scheduling challenges with having CEO after CEO getting on stage to make comments. If one or more of them busts through the time limit, the entire meeting can run behind schedule.

Some of the LPs suggested that showing short videos focused on the products, services and senior executives of portfolio companies can work well, both as a control on time and an appealing diversity of formats presented. But they stressed that with these videos, GPs should think carefully about why they are highlighting certain investments. If nothing much has changed in the past year at a company, why spend time on it?

Allow more informal and unscripted moments

LPs frequently say that they learn more about what’s really going on at a firm during AGM coffee break conversations. And while GPs naturally want to control messaging, allowing AGM participants to mingle in informal settings can help them learn more about your most important asset – your network of talented people.

Sometimes, social events designed to bring more spontaneous interactivity to an AGM can be viewed as overly formal. One LP says he has a particular distaste for night-before meals at expensive “white tablecloth” restaurants, where conversations are sometimes guided by members of the GP team and where “everyone has their fake face on.”

Instead, this LP says he had one of his most enjoyable and educational AGM moments was when a large group of attendees went out to eat from a cluster of food trucks. “Some of the most unstressed conversations happen when you’re standing around eating with your hands,” he adds. “Those conversations are so much more informative. If I want a three-course meal at Jean-Georges, I’ll just go with friends.”

Don’t let prospective LPs take up resources

The AGM is meant to update LPs about the performance of the fund to which they have all committed capital. Some GPs also use the event as an opportunity to educate and network with prospective LPs. 

 “I absolutely hate this,” says an LP. “You have an onslaught of LPs in the room, some of whom are investors and some of whom are not. So you charge existing LPs for inviting in these prospective investors. I didn’t pay for a GP to do marketing. I don’t get that much time with a GP. This is my time, not yours.”

Don’t organize boring virtual meetings, either

One LP observes that when he first started working in the private equity industry in the 1990s, it was common for AGMs to be three-day boondoggles to which some investors brought their family members. Those events have largely morphed into single-day or partial-day executions. 

Amid the stay-at-home rules of COVID-19, the AGM is being reimagined again, but in a very contracted timeframe. What hasn’t changed with virtual meetings is the LP desire to receive impactful, relevant information efficiently. LPs never want to sit through hours of “scripted, robotic and insincere” presentations, as one investor put it. And they really don’t want to sit through hours of dull presentations via Zoom.

David Snow is a Partner at Privcap Media