The Investor Relations Challenge: Reprinted from the AIMA Journal

Reprinted from the AIMA Journal Q2 2023 Investor relations resources are stretched by increasing client demands for information. They want more information, and want it more frequently, with regular monitoring and oversight moving up the priority list.

Investor relations resources are stretched by increasing client demands for information and many investor relations teams are at breaking point. Investor demands for data are at an all-time high. IR teams are inundated with requests via requests for proposals (RFPs), requests for information (RFIs), due diligence questionnaires (DDQs), monitoring questionnaires, consultant databases and various client templates.

Every request is different, and most are complex and lengthy, getting longer every year. We conducted research into the questions and answers that passed through our platform over the past three years and found that DDQs had increased in length on average by 20% between 2019 and 2022.

Investors are not only asking for more information, they also want it more frequently, with regular monitoring and oversight moving up investors’ priority list.

Our research also found that each DDQ or RFP takes on average, 16 hours to complete. All of this contributes to an increased workload for investor relations and client services teams within manager firms.

What is driving the increase in requests for data?

There are a few reasons why allocators and consultants are requesting more data. From our experience, we know they want more quantifiable data so that it can be tagged, flagged, scored and analysed in digital platforms like ours more easily. The driver behind more quantitative questioning is often the allocator or consultant’s desire to benchmark. But, when asking a Yes/No question, most are followed up by clarifying questions or further documentation.

However, there is also a growing demand for qualitative data. This could be to combat manipulation or numbers but also provides valuable context and reasoning. This combination of questioning adds more complexity to the response process and places a greater burden on IR and client services teams.

Regulations are also driving complexity

Alongside allocators and consultants requesting more data for benchmarking or risk management purposes, there are also regulatory drivers that force them to ask more questions.

In 2022, the US Securities and Exchange Commission (SEC) put forward proposals to prohibit Registered Investment Advisers from outsourcing certain functions and roles to third parties without conducting and proving that effective due diligence and monitoring processes were in place.

The SEC’s recent cyber security rule proposals may have also driven an increase in cyber security related questions. The long form version of AIMA and AITEC’s cyber security DDQ (accessible by AITEC or AIMA members only) now stretches to 53 pages covering areas such as policies, standards, controls, data security, physical security, access controls, business continuity and more.

In Europe, increasing regulation around ESG disclosures have led to increased questioning of fund managers and general partners. On average, ESG questions featured 10 times more frequently in 2022 than they did in 2019, when evaluating the questions and answers passing through Dasseti’s platforms.

Due diligence volumes ebb and flow, making it hard to maintain consistency

Our research found that requests for information peaked in volume at certain points during the year, annually and quarterly in many cases. Ad hoc requests could come at any point and teams could be overwhelmed.

Consistency and quality can naturally suffer at peak times and clients report that less care and time is spent completing RFPs, DDQs and RFIs at busy times. This can lead to inconsistencies in responses, lower quality responses or the difficult choice to ignore certain new mandates if they not certain to win, or if the values are below a certain threshold.

Investor Relations teams have competing priorities

As we know, manager marketing, client services and investor relations teams tend to be lean, with some comprising just a single individual, but the remit for those teams is broad. Existing client requests take up a large proportion of team resource, with regular DDQs, client requests, quarterly questionnaires and surveys to complete.

During busy fundraising periods, marketing and IR teams are responsible for RFPs, RFIs, pitchbooks, factsheets and other marketing materials, plus ad hoc requests.

The hiring dilemma

Hiring additional resource often seems like the only way to meet resource shortage, but fee transparency means that teams cannot always justify additional headcount. Where we see teams growing, many are adding junior teams who lack the experience, knowledge or expertise to craft high quality, consistent responses to requests.

What is the solution?

Firms must look at their processes to identify ways of making them more efficient. Or finding ways to help their current teams do more.

Technology can help

Many managers and general partners (GPs) know that technology that can automate and streamline processes is out there. But is it tailored to their exact requirements and will it meet the specific needs of the investment sector?

The challenge – Question & Answer banks can be time consuming to manage and become out of date quickly

Many RFP tools solve one part of the problem. They may provide a central repository for standard questions and answers for use in DDQs, RFPs and RFIs. But maintaining those can be hard work and they may not allow easy creation of marketing materials or client reports.

Can the current solution automate reminders for subject matter experts to update data points? This feature could allow Q&A banks to stay current with little to no involvement from the investor relations or marketing team.

Can the current solution scan previous responses to find the best fit, or will it only search the Q&A repository? Searching past responses could reduce the time needed to populate and maintain a response repository.

The challenge - Many managers and GPs we speak to have already invested in one or more software tools and replacing those would be costly and disruptive

Look for software that works in harmony with existing software, that can plug capability gaps. Integrate using application programming interfaces (APIs) or extract data to use in different places.

The challenge - Current solutions may be too prescriptive and inflexible

There are solutions on the market that aim to address the challenges faced by managers and GPs when sharing company and fund data with investors and prospective investors, but they can be inflexible and prescriptive. In an industry where competitive edge is everything, sharing your customized firm and fund data is imperative.

Coupled with this, investors are often unable or unwilling to work with data sets that don’t meet their requirements. Look for a solution that works with the investors’ preferred formats, or one that is flexible enough to accommodate custom fields that may be unique to a manager of fund.

The challenge – Stretched IR and marketing teams don’t have time to undertake lengthy onboarding processes or learn complex new software

Look for solutions that are turnkey or include a managed onboarding. User friendly interfaces and intuitive controls are a must. 

Post onboarding, what support is available? Is this an additional cost or is it included in the license cost?

For significant efficiency gains, automation is a must have to speed up processes and maintain consistency across teams, regions, strategies, or clients. Automation can help in creating an early draft RFP or DDQ or automating alerts and updates.

The challenge – many software platforms are industry agnostic and not designed for the investment sector. Terminology is different and workflows don’t fit the investment process

Industry-specific toolsets are a big plus point. There are many variations in terminology, e.g., AUM to assets under management and it is helpful for systems to recognise and accommodate these variants.

The final point to remember is that technology is a business enabler and should mould to fit your unique internal processes, but it is also important to flex to meet the needs of investors. Expecting them to adapt processes to meet your systems and platforms will not work.

Read the article in the AIMA Journal Q2 2023

Dasseti has digitized the AIMA Manager DDQ in the platform to make it easier for managers and allocators to complete.

For more information or advice on selecting software to support an investor relations or marketing team, get in touch with the team at Dasseti.

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