How Emerging Managers Are Winning Institutional Capital & Which LPs Are Backing Them

The Most Active Investors & The ILPA Emerging Manager ToolKit

🔍 What Institutional LPs Look for in Emerging Managers

Institutional investors assess emerging managers based on several key factors:​

1. Track Record and Experience

• Demonstrated Investment Success: LPs prioritize managers with a history of successful investments, even if not within a formal fund structure. This can include personal investments, special purpose vehicles (SPVs), or experience from previous firms.

• Team Cohesion: A management team with a proven history of working together is valued, as it suggests stability and effective collaboration.​

2. Clear Investment Strategy

• Defined Thesis: A well-articulated investment thesis that aligns with the LP's objectives is crucial.

• Market Opportunity: Managers should demonstrate a deep understanding of the market and the unique opportunities they aim to exploit.​

3. Operational Excellence

• Robust Infrastructure: LPs expect strong operational frameworks, including compliance systems, risk management policies, and transparent reporting mechanisms.

• Governance: Clear governance structures and ethical standards are essential to gain institutional trust.​

4. Alignment of Interests

• Skin in the Game: Managers investing their own capital into the fund signals commitment and aligns interests with LPs.

• Fee Structures: Reasonable management fees and performance incentives that reflect the fund's success are preferred.​

5. Diversity and Inclusion

• Inclusive Leadership: Firms led by women, minorities, or other underrepresented groups are increasingly favored, reflecting a broader industry push towards diversity.

• Workforce Diversity: LPs may assess the diversity of the entire team, not just leadership.​

6. ESG Integration

• Responsible Investing: Incorporating Environmental, Social, and Governance (ESG) factors into investment decisions is becoming a standard expectation.

• Transparency: Clear reporting on ESG metrics and outcomes is important for LPs focused on sustainable investing.​

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🏛️ Illinois Teachers’ Retirement System Doubles Down on Emerging Managers, Focusing on Minority and Women-led Firms

The $73 billion Teachers' Retirement System (TRS) of Illinois has made waves with its latest move to bolster their diverse and emerging managers program. The pension fund is hiring a new investment officer to support this initiative, further cementing its 20-year legacy in fostering minority- and women-led firms.

Jose Gonzalez, the current senior investment officer for the program, recently celebrated the initiative's milestone anniversary on LinkedIn, emphasizing the program’s growth and long-term significance.

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🌟 Other LPs Backing Emerging Managers