LPs show willingness to move towards virtual due diligence with their PE Funds

As a tech company we are always watching out for changes in behaviour caused by technology, so we were interested to see reports surfacing that LPs are becoming more comfortable with doing due diligence on fund managers remotely. 

According to a survey from the placement and advisory firm, Eaton partners, LPs looking to invest in new PE Funds are becoming more flexible with their investment policies to enable them to invest without physical meetings taking place.

Whilst the general consensus seems to be that people would rather meet face to face, the willingness to use technology to enable the introductory process shows a shift in working practices which we believe will continue long after the pandemic has gone. 

Industry insiders noted an initial reluctance to change behaviours based on the assumption that the physical distancing would be a temporary measure; however once investors realised that the situation was going to remain for some considerable time, they understood they needed to change their approach to enable them to continue with their core objective of investing and making new commitments. 

The online publication, Private Equity International, notes from a conversation with Ellinor Shrewelius, (Director for Fund Investment at AP6) that some LPs are already using a dual approach. They expect that when the pandemic is over the industry will see a hybrid of virtual and physical meetings for both due diligence and annual meetings. Perhaps this new way of working is not so bad?

We suspect that one significant factor that will cause long term changes in this direction is geography; LPs cannot insist on fund managers making ethical investments whilst simultaneously taking long haul flights around the world to meet with new managers. Whilst Covid may have been the recent catalyst towards changes in how we conduct business together, environmental consciousness will be the driver to a more permanent shift towards virtual engagements between GPs and LPs. 

One final reflection; if this pandemic had occurred as little as ten years ago, the number of firms with the technology for all their staff to meet remotely would have been significantly less than it was in 2020. So, whilst some LPs might have taken some convincing to move to the virtual model, we are sure that they are simultaneously breathing a sigh of relief that it was possible to move so easily to that virtual model during all the chaos.