Private Capital firms – spanning Private Equity, Venture Capital, Asset Management and beyond – are becoming household names due to the trillions of dollars they invest, their influence and the impact they can make on major issues, ranging from sustainability to human rights to responsible investing. This intensified spotlight on private capital firms requires skilled communications and corporate affairs leadership and teams that can act as both a shield (providing risk mitigation) and sword (driving competitive advantage).
A shield – Corporate affairs as your risk management tool
Communications teams can help firms navigate risk and stakeholder engagement in a complex and changing environment. As private capital firms have become more entangled in controversial social, environmental and culture debates – sometimes intentionally and many times not – they need to align their messages with actions and ensure the decision to enter the fray is considered, intentional and with awareness of the potential risks and ways to mitigate. Giving a sense of the challenge, it’s common to see allegations of “woke capitalism” or “greenwashing“ from some while well-intentioned initiatives or approaches also come with complexity as highlighted by the recent press coverage in The Financial Times: “Wall Street’s largest asset managers, private equity firms and brokers have warned that a backlash against sustainable investing is now a material risk, in filings that show how acrimony over ESG principles has become a perceived threat to profits.”
While there is much more to run on this topic, what is clear is that getting the message and stakeholder engagement wrong has real world, real money consequences.
A sword – Communications as your competitive advantage
Competition remains intense in the Private Capital arena – from attracting investors to convincing the CEO or founder of “the next big thing” start-up that you are the partner they want to grow their business with. Being part of the right conversations at the right time, having a strong reputation and brand, and being able to tell the firm's story effectively are all crucial to winning over stakeholders. A well-crafted narrative that considers investors, investment stakeholders and the broader community, along with a solid business case, can make the difference in getting to the handshake.
When deals increasingly also need to pass muster in the court of public approval and opinion and potentially with regulators, having the needed advice and approach is crucial to turning that handshake into an executed deal that delivers on the business case. Leaving it to others to shape the narrative about your firm or investment can be a risky move in such a competitive market.
The very best leaders are also building the communications understanding and story-telling capacity of their deal teams – helping them put their best foot forward as they go hunting for the next opportunity.
Leading firms are seeing the value…and already investing
Private Capital firms have clearly started to wake up to the realities of being regular flashpoints in the broader public conversation. Many have now recognized the need to proactively navigate this new environment and are investing in leaders who can help them understand public sentiment and then make sure their voice is heard by important stakeholders. Instead of viewing their communications teams in a limited functional sense, they are now seeking real partnership and guidance in an increasingly complex setting.
Translated into practice, we have seen several leading firms across the private capital space make significant strategic investments in their communications and corporate affairs capabilities. The U.S. firms have led the way, with European and Asia-focused firms looking to quickly catch up – pivoting from a more traditional focus on supporting their portfolio companies to creating an integrated approach of building the reputation of their firm in parallel. This investment has taken place via a mix of appointing senior experienced corporate affairs and communications leaders (in some cases bringing them on them to the Executive Committee) alongside upskilling and building the capability of the teams responsible for communications, government affairs, advocacy, and stakeholder engagement (in part, decreasing their reliance on, and making better use of, external agencies). They have also looked to expand the remit of those teams, integrating marketing and other responsibilities to ensure a joined-up narrative to the market.
Firms should be thinking broadly when it comes to finding and developing talent
The new enthusiasm for great communications has been coupled with an openness to look more broadly for the talent to fill these new roles. Instead of hiring from within or from other private equity or similar firms as was the traditional path, we are increasingly involved in bringing in talent that is new to the Private Capital space. We have seen a real demand for corporate affairs and communications leaders who have broad experience in listed/public companies, who have managed high-scrutiny stakeholders and who might be new to the world of Private Capital but have great exposure across industries, such as technology, and across issues, including ESG and purpose communications. What is attractive is their ability to bring new and creative ways of creating cut-through engagement strategies.
While Private Capital firms are looking more broadly for top talent, it must be recognized that there are particular characteristics that leaders generally need to and thrive in this sector – a combination of strategic insight and a very strong results orientation, high levels of resilience and agility, and an entrepreneurial spirit. The importance and ability of being able to effectively influence in non-corporate structures and work collaboratively, to succeed in this culture, cannot be understated – many PE funds are partnerships and operate under a consensus driven culture. Outside of the investment committee meetings, there has been a tendency in many organizations to be naturally risk averse, so while fund communications leaders are tasked with innovating the brand and communications, they are often faced with a preference for a low-key, under-the-radar approach. Voiced concerns around compliance or preferences for a tried and tested approach of “staying under the radar” are often strong. The communications leaders that can navigate this and effectively push through fresh thinking and new approaches are the ones having most impact – but it takes particular strengths. As leader put it, “We need to surprise and delight the partners. But try not to only surprise.”
Invited to the party but not always at the top table…yet
While funds are waking up to the need for communications leaders, and the leading firms have started to embrace this, communications leaders still have some way to go in taking their seat at the table in this sector. They have been invited in, but they remain under-represented in the ranks of partners and in senior levels of the firm and remain under-represented in Executive Committees compared to their peers in other sectors. Although their elevation into the partner ranks might be still some time off, the firms that recognize the value of having a strong communications leader, will be better positioned to capitalize on the opportunities that lie ahead.
A decision to make
Private Capital firms are, without doubt, major players in the global economy and, even if many still prefer to stay in the background, that choice will not always be theirs to make. The spotlight of public opinion can quickly swing your way; other firms who have invested in reputation will gain competitive edge. With this in mind, Private Capital funds should be asking themselves – without the right communications leadership, team and strategy, are we ready?