During a two-week period in January both Apax Partners and East Capital communicated with their investors online for the first time, a sign that more private equity firms may be looking to utilize new communications practices to reassure nervous LPs.
Amid the current recession several CFOs have said they are getting more calls from LPs, some of whom they barely heard from in the past, requesting much more granular-level information on portfolio companies as well as for cash projections, distributions, valuations and issues related to FAS 157. With increased numbers of investors demanding time from managers, firms are looking at more efficient ways of reaching out than just picking up the phone.
In January Apax Partners chief executive Martin Halusa appeared in an online video to reassure LPs about the firm's latest fund, the €11.2 billion Apax Europe which closed in 2007. The fund is the largest raised in Europe to date and has been 40 percent invested so far. Halusa said his decision to speak directly to LPs ahead of regular earnings reports was motivated by “increasingly alarming and alarmist commentary” about the fortunes of the private equity sector.
In the video Halusa told investors that a quarter of the fund's investments are at risk of underperforming, and that Apax would “spend a considerable amount of time focusing on these companies”. He added that the firm expected to contain the impact of these investments on the portfolio.
Around the same time, Eastern Europe-focused alternative asset manager East Capital held its first live webcast, with co-founders Peter Elam Hakansson and Karine Hirn answering real-time questions e-mailed from viewers. The two assessed the effects of the current credit crunch, long-term investment strategies and valuation of businesses in Eastern Europe.
The firm plans to release another live webcast during the next financial quarter. Financial broadcaster Cantos, which produced Apax's online presentation, said several other private equity firms have worked with it to produce their own videos for the first time as well.
Jennifer Glassman, chief financial officer and managing director of Towerbrook Capital, said her firm conducted its own webcast at the end of the year with co-CEOs Neal Moszkowski and Ramez Sousou taking questions from LPs. She said such measures are an efficient way to reach out to all LPs at once and demonstrate transparency.
Even so, Mark Maruszewski, partner at Pomona Capital, said some investors may not speak up in large online forums due to concerns about asking the wrong questions or taking up time. He said allowing LPs to e-mail or type in questions anonymously is a good way to ensure full participation.