19 (+4) perspectives on how Limited Partners are approaching COVID-19

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One of the core relationship types that drives success in the private investing landscape is with your limited partners.   After all, without money from LPs, there is no fund.  Moreover, given limited partners invest in you and your judgment – a long-term relationship underpins every investment decision.

There has been a lot of perspective shared on how COVID-19 will impact entrepreneurs and startups (and rightfully so!).  We’ve also created a guide on general relationship development while in the world is in the midst of social distancing.  However, there’s been much less guidance for investors on how to navigate their own fundraising plans and relationships.

To help bridge the gap, we’re collecting the best content we’ve found on managing limited partner relationships in the coronavirus era. 

The different sections of this post will be relevant for different audiences, so use the links below to navigate to the most useful content for you:

This will be a living post – so feel free to check back over time for updates! If you find the content useful:

  1. Feel free to share it with a friend. As we all try to understand and navigate this new (and rapidly shifting) normal, our chances of success improve by working together.
  2. Let us know if you come across other resources you think would be helpful for others
  3. Reach out to us! We love hearing from you.

General resources

Research and webinars

1. Carta‘s Limited Partner webinar
(from Ahoy Capital, University of Chicago, Georgetown Investment Office, and Cendana Capital)

Working with LPs in 2020 | Carta

The 2020 outlook: How COVID-19 and market turbulence are impacting investing decisions. What LPs look for: How LPs will decide which GPs to invest in. Reporting: The best practices for providing transparency and keeping LPs up-to-date.

One key quote: “Everyone is taking a pause…but if you’re radio silent, it’s not the best look. It’s really important to show your emotional intelligence in how you approach LPs at this point…Be very thoughtful and get creative – there should be good deals you’re executing on – make sure they’re aware of the deals you’re closing. Any creative insights or thoughts that you see or that are happening in the market. It’s a time to shine and show your persistence and grit.

2. Pitchbook forecasts the impact of COVID-19 on the PE and VC markets

Q1 2020 PitchBook Analyst Note: COVID-19, the Sell-Everything Trade, and the Impact on Private Markets | PitchBook

This analyst note assesses what’s in store for PE and VC firms in the wake of recent market volatility and an impending economic slowdown due to the coronavirus. Dissecting historical performance and fundraising data, our analysts highlight how private markets have fared in past downturns and discuss the key differences in the newest bear market.

One key quote: “Today, while illiquidity remains a concern and will be an issue for some LPs, we think the risk of the denominator effect is somewhat mitigated because many LPs are currently underallocated to private markets. As a result, while there may be a pullback in fundraising (as our PE analysts predicted entering the year), we do not anticipate a dramatic downturn.

Interviews + blog posts

3. Andrew Golden talks about navigating through the past 2 crises, and how Princeton’s Endowment is thinking about this one.
(President, PRINCO – 30-40% allocation to PE / VC)

Andrew Golden – Navigating Princeton’s Endowment Through (Another) Crisis (Capital Allocators, EP.133) – Capital Allocators

Andy Golden is the President of PRINCO, where he has overseen the management of Princeton University’s $25 billion endowment since 1995. He was an early guest on the show and came back to discuss steering the ship in this tricky time. Our…

One key quote: “Partnership management, roster management, is job one. We would never create a new relationship to seize upon an acute opportunity. Because then what happens when that opportunity goes away? We want to partner with A+ people, and we’re going to try to make that work however we can, in whatever environment we can, subject to the constraints of physics and liquidity.

4. Sandra Robertson discusses the shifts she’s making to Oxford University’s Endowment during COVID-19
(CEO / CIO, OU Endowment Management ~23% allocation to PE / VC)

Sandra Robertson – Calibrating Oxford’s Portfolio in a Crisis (Capital Allocators, EP.131) – Capital Allocators

Sandra Robertson, OU Endowment Management’s esteemed CEO and CIO, rejoined me for an update on how she and her team have been navigating the markets. It’s quick and chock full of wisdom, including her priorities, calibration of the portfolio,…

One key quote: “Where we haven’t been able to get allocation to a particular manager, and there was a secondary opportunity there, we would be willing to consider that. We have a list and that would be we’d like to talk to GPs about that. So there are little pockets of opportunity like that – no major swings in this environment.

Venture Capital focused resources

Research and webinars

5. Industry Ventures‘ survey on the impact of COVID-19 on VC funds

The Impact of COVID-19 on VC Funds

Born amidst the dot-com crash, we understand firsthand the challenges of illiquidity. Over the last two decades, we pioneered new segments of the venture capital market. Today, Industry Ventures manages over $3 billion and serves founders, venture funds and institutions across the ecosystem.

One key quote: “Most respondents expect their next fundraise to be delayed or prolonged, but a notable 39% believe fundraising will remain on schedule over the next 18 months or so.

6. Silicon Valley Bank‘s webinar on fundraising post COVID-19
(University of Chicago, Cendana Capital, Foundry Group)

Fundraising for Emerging GPs Post-Coronavirus: Advice from Seasoned LPs

You’re invited to join Silicon Valley Bank for a virtual workshop on Thursday, March 19th. Led by Jim Marshall, Head of SVB’s Emerging Manager Practice, this workshop will feature exclusive insights and engaging conversations from:- Michael Kim from Cendana Capital- Lindel Eakman from Foundry Group- Joanna Rupp from the University of ChicagoTogether, we will discuss the strategic navigation of current and future fundraising conditions given the recent development of the Coronavirus pandemic.

One key quote: “To the extent you can warehouse any investments…it flips you from being a powerpoint, to being a real fund. That creates more momentum, and actually differentiates you from the other 500 people out there with powerpoints trying to raise a first time fund. I also raised working capital for Cendana – 6 of my friends cobbled together a little round for me.

7. Kaufmann Fellows on better LP models for MicroVCs

A Better LP Model for Micro-VC and Emerging Managers

Question: are limited partners meeting the needs of micro-vc and emerging managers? We don’t think so. Raising capital from limited partners is hard. It’s harder if you are pitching a micro-VC strategy. But it becomes the hardest to raise during a global crisis like we are in today.

One key quote: “In fact, according to a survey by Samir Kaji at First Republic Bank, on average 67% of capital raised by first time funds comes from family offices.

Interviews and blog posts

8. Chris Douvos on lessons learned from prior downturns
(Managing Director, Ahoy Capital)

210. Crisis Coverage w/ Chris Douvos – LP Lessons from ’01 and ’08, The Denominator Effect, Capital Calls & Fundraising in a Down Market – The Full Ratchet: VC | Venture Capital | Angel Investors | Startup Investing | Fundraising | Crowdfunding | Pitch | Private Equity | Business Loans

Chris Douvos of Ahoy Capital joins Nick on a special Crisis Coverage installment to discuss the LP Lessons from ’01 and ’08, The Denominator Effect, Capital Calls & Fundraising in a Down Market. In this episode, we cover: What is the denominator…

One key quote: “When someone says to me ‘we see value’ – there’s value and then there’s value. 20% off is still 80% on. You’ve got guys on the buyout side who can buy 50 cent dollars.

9. Samir Kaji on the fundraising implications for emerging funds
(Senior Managing Director, First Republic Bank)

212. Crisis Coverage w/ Samir Kaji – Relief $ for Startups via CARES Act, EIDL, PPP; How an Extended Downturn Affects Emerging VC Funds

Samir Kaji of First Republic joins Nick on a special Crisis Coverage installment to discuss Relief $ for Startups via CARES Act, EIDL, PPP; & How an Extended Downturn Affects Emerging VC Funds. In this episode, we cover: Startups… The CARES Act became law on 3/27, but many are having trouble making sense of it and how it applies…

One key quote: “I think we’ll probably drop anywhere between 30-60% in terms of active seed firms. I also think we’ll see less seed funds come to market to offset that – partly because if you’re a first time manager, the chance of raising a fund of any reasonable amount in any reasonable timeframe is very low...fundraising is probably the hardest it’s been in 13 years

10. Beezer Clarkson on the fundraising environment during COVID-19
(Managing Director, Sapphire Ventures)

The VC Fundraising Environment and COVID-19

It’s only Tuesday morning and already it’s been a tough week and while it’s too early to know exactly how #COVID19 will impact the #VC fundraising environment. All of us at Sapphire Partners are getting questions from folks on our perspective, including being sent this article in Trusted Insight on the environment #endowments might be finding themselves given the current market crisis.

One key quote: “Ask your LPs how they are doing as people. And while it might be too soon — it could also be worth asking if the current environment has impacted any of their investment considerations going forward in the near term. It’s better to start the conversation now.

11. Samir Kaji answers a set of questions submitted by emerging VC investors
(Senior Managing Director, First Republic Bank)

Emerging Manager Q&A mailbag

Follow me for my thoughts on the venture market, with a focus on the continued growth with the emerging manager landscape I’ve spent a considerable amount of my shelter in place time having discussions with some very smart people in the market about what this economic dislocation might mean for the emerging venture fund landscape.

One key quote: “What I’m hearing is that only a small percentage of institutional LPs are seriously considering new manager allocations for 2020 (absent those that are in their current pipeline or who they have followed for a material amount of time).

12. Lo Toney shares his team’s perspective on the economic impact of the Coronavirus
(Founding Managing Partner, Plexo Capital)

The Economic Impact of Coronavirus: What GPs Need to Know

We are at a critical point in our economic future as the Coronavirus (COVID-19) has wreaked havoc across all aspects of our daily lives. As we enter a bear market, the venture capital and startup community must dive deeper not only into startup fundraising, as Sequoia’s Black Swan note points out, but with general partners (GPs) and their fundraising endeavors.

One key quote: “GPs need to also think about the composition of their LP base. If a fund has closed, GPs need to over-communicate with their LPs during this period of uncertainty. There is a higher risk of defaults in a down market, and GPs should try to remain proactive in identifying any potential challenges that LPs may have to meet their capital call commitments. This especially holds true with emerging managers as the composition of their LP base typically includes a large portion of individual investors.

13. Mar Hershenson shares advice from a survey of 59 institutional LPs for Emerging Managers
(Managing Partner, Pear VC)

Advice for Emerging Managers in the times of COVID-19

by Mar Hershenson, Managing Partner Pear VC Last week, All Raise hosted a panel targeted to emerging managers – what advice can we provide to managers that are not yet established, ie, managers that are raising their first or second institutional fund (maybe their third).

Her key takeaways:

  • Adjust your Fund Size.
  • Expect fundraising to take longer.
  • Concentrate on LPs you have met before.
  • Use this time to build relationships over Zoom.
  • Acknowledge situation and expect to give more information to LPs.
  • Be patient and take a long term perspective.
  • Emphasize why they should invest in you (as always).

14. Samir Kaji gives some advice on how to leverage capital call lines in this environment
(Senior Managing Director, First Republic Bank)

Use of Capital call lines for Emerging Managers during economic downturns

The use of capital call lines by venture capital funds has seen a dramatic increase over the last few decades — Today >50% of VC funds that qualify are using these lines.

One key quote: “Line sizing should be enough to cover a quarter’s worth of deal activity and lines are rarely more than 10-15% of fund commitments.

15. Lindel Eakman shares key learnings from his portfolio of GPs, as a Limited Partner at Foundry Group
(Managing Director, Foundry Group Next)

Learnings from our community – Lindel’s Leap

One of the values that I’ve really internalized over the last few years is to think about the world in terms of networks, and our own value or role in those networks. The more interesting networks are not hub-spoke networks but rather mesh networks that can and do create value even while missing a node….

One key quote: “Understanding where you stand in your LPs’ portfolios is imperative, having multiple points of contact is important, and you should not just assume a re-up from them if you have to raise this year. Do your best to slow down and not hit the market until 2021. There will be a logjam of funds trying to wrap up in the fall, and LPs are way overcommitted.

16. Jacob Tasto distills their analysis of where Limited Partners are deploying capital, based on fund closes

Flight to the ‘Known’: COVID-19 Pushes Venture Capital Fundraising to Concentrate in Established Firms – Different Funds

How the coronavirus pandemic is affecting venture capital fundraising and LP allocations: analysis finds that emerging managers, women-led firms, and micro VC funds likely to bear the burden. As the US rolls into month three of shuttered storefronts, mass layoffs, and forced teleconferencing, nearly every conversation around venture capital has (understandably) been steered by the not-so-subtle hum of coronavirus-driven uncertainty.

One key quote: “What we’ve seen so far points towards at least a short-term future where LP capital flows increasingly towards known managers perceived to be stable — that is, large generalist funds often managed by male-dominated teams that have been established for years, some of whom successfully weathered the last downturn.

Private Equity focused resources

Research and webinars

17. Privcap brings in investor relations experts to discuss the Limited Partner / General Partner dynamic in the COVID-19 era
(from StepStone, Lime Rock, and InRider Partners)

IR in the Time of Corona – Privcap

Experts from StepStone, Lime Rock and InRider Partners discuss the LP/GP dynamic when everyone is required to stay home and when economic uncertainty is roiling the globe. Topics include alternatives to physical AGMs, Q1 2020 valuations, virtual fundraisings and much more.

One key quote: “First time funds will be hard. You can get the story out there, but it will be very hard for you to make a connection with an LP over the phone, and quite frankly, I don’t know anyone that’s really written a check to a first time manager without having met them in person.

18. Preqin summarizes a survey of 110 asset managers on their response to COVID-19

How Investors Are Responding to COVID-19

At least for the short term, investors are revising their commitments to alternatives following the market disruption caused by the COVID-19 pandemic. When we surveyed investors back at the end of 2019, the majority (83%) said they were planning new commitments to alternatives in the year ahead.

One key quote: “Indeed, investors appear to be looking closely at healthcare-focused private equity for the rest of the year. All eyes are currently on healthcare systems across the entire world as they attempt to overcome the virus, and 36% of surveyed investors plan to target the sector in 2020 as a result of the pandemic.

19. Bain & Company (the leading consulting firm for Private Equity due diligence) on the likely impact of COVID-19

The Impact of Covid-19 on Private Equity

How will the coronavirus crisis affect the private equity industry? The only honest answer is that nobody really knows. As a healthcare crisis, it is unprecedented in its global sweep and impact. As an economic event, it raises many unknowns about how the sudden demand shock and existential dread will affect business activity and consumer behavior-especially if the lockdown persists for an extended time.

One key quote: “LPs that backed away from private equity in the wake of the global meltdown regretted it when the industry rebounded during the subsequent recovery. These factors suggest that the decline in fund-raising this time around might be less severe than in 2008–09, when the global total dropped more than 50%.

20. Private Equity International with some troubling reporting on limited partners defaulting on their commitments

LP defaults ‘already happening’ in PE | Private Equity International

Two European LPs have defaulted on capital calls, and more are rumoured, as LPs get hit with large, often early capital calls and drying up distributions.

One key quote: “Suddenly [LP’s] distributions are going through the floor…at the same time, GPs have increased their capital call rates. Some LPs weren’t expecting draw-downs until summer this year on any of their funds.”

21. Eaton Partners survey of 107 institutional investors suggests they’re planning to keep private market allocations flat

Most Institutional Investors Are Sticking to Their Private Market Allocations During the Pandemic | Chief Investment Officer

Institutional investors are, for the most part, doing little in the way of dynamic asset allocation with their private market holdings in today’s environment, according to a new survey by Eaton Partners, a placement agent and fund advisory firm.

One key quote: “There could be some increased appetite for private equity fund managers with a 2018-2019 vintage who are looking to deploy capital. Once the markets settle down from the current volatility, vintage funds will be ideally placed to acquire portfolio companies at the bottom of the pricing curve.

Interviews and blog posts

22. Steve Nelson, who represents 500+ limited partner firms, on how they’re thinking through the crisis
(CEO, Institutional Limited Partners Association)

Steve Nelson – Assisting Private Equity Allocators Through Turbulent Times at ILPA (Capital Allocators, EP.129) – Capital Allocators

Steve Nelson is CEO of the Institutional Limited Partners Association or ILPA, a non-profit that engages, empowers and connects limited partners (LPs) to maximize their performance. It has over 500 member institutions that represent $2 trillion…

One key quote: “The areas where there’s real interest and opportunities that could emerge given how the environment could shape up – distressed, credit opportunity funds, secondaries, down the line – I think there’s budding interest going to be growing interest in those areas as we go forward.”

23. Allen Latta’s view on how private equity Limited Partners should be approaching COVID-19
(Managing Partner, Campton Private Equity Advisors)

LP Corner: Some Thoughts for LPs During the COVID-19 Crisis

In any recession or other financial crisis, it’s important to take stock of your entire portfolio and to work with your advisers to understand your current, short-term and long-term cash and cash flow needs, and how your portfolio is positioned to meet these needs.

One key quote: “In the GFC, I recall fund secondary transactions being conducted at discounts of over 50% to NAV.  This means that there may be some very good opportunities for LPs to buy fund secondaries from distressed LPs.

Thanks for reading!

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