Spruceview's success story

ENHANCING FUND COMMUNICATIONS TO LPs WITH OUR DEDICATED SUPPORT TEAM

“The Palico team gave us support on multiple levels. They made themselves available for bi-weekly calls to check in on our experience, as well as for ad-hoc requests. They helped us set up and implement a bi-weekly sequence of email reminders about our fund"

Spruceview Capital Partners: Funds of funds that LPs want

The PE fund of funds market has come of age. Back in 2007 these vehicles represented nearly 14% of the total private equity fundraising market, offering access to an asset class that, at the time, was not well understood. Today, that contribution is less than 4%.

This speaks to two trends. The first is that PE has since gone mainstream, an influx of investor types over the past decade diversifying the LP mix as the industry has drawn greater sums of capital and from new sources. This popularity means that funds of funds (FoFs) hold less of the overall pie.

The second is that FoFs fell out of favour with LPs in the wake of the global financial crisis. As management fees came under the magnifying glass for the first time, investors found it harder to justify the second layer of costs. This cooling sentiment forced some of the biggest operators to reinvent themselves as “all under one roof” multi-strategy platforms, with secondaries increasingly taking centre stage.

But Spruceview Capital Partners has stuck to its guns.

The Palico touch

The secret to Spruceview’s success is its clearly defined, differentiated model that focuses exclusively on the US lower mid-market. “When we think of low and middle markets, we think of companies with an EBITDA of less than $25m-$30m,” an area that the firm has “consistently seen deliver returns across economic cycles”, says Neetesh Kumar, a partner at the firm.

Having a highly successful, value-generative strategy is one thing. But articulating and communicating that strategy to investors is something else altogether. That’s where Palico comes in.

In 2021 the Boston-, Denver- and New York-based firm approached us for the first time, listing two new funds on the platform. Using our matching algorithm, we notified relevant LPs in our global investor pool of these opportunities, alerting them as momentum picked up and fundraising milestones were reached.

The Palico team gave us support on multiple levels. They made themselves available for bi-weekly calls to check in on our experience, as well as for ad-hoc requests. They helped us set up and implement a bi-weekly sequence of email reminders about our fund” says Rich Terres, a Spruceview partner.

As part of its fundraising service, Palico helped communicate the advantages of Spruceview’s niche strategy in a cost- and time-efficient manner through frequent fund updates, fund manager spotlights, our Capital Calls podcast and our weekly Key Trends Newsletter.

Value-added

These efforts have already proven successful. Spruceview has received 33 expressions of interest from LPs wanting to understand more about their funds of funds. Of course, quality always trumps quantity and at Palico we are always striving to improve the interactions that GPs have with prospective investors.

For this reason we provide a ‘scorecard’ report which helps our clients to understand their engagement with LPs that come through the platform. We also offer pointers for how to adjust and refine this interaction to increase the likelihood of leads converting to capital commitments.

“I think with all things like this, it’s the follow-through that really matters” says Terres. “This has taken some time, and I don’t think it’s unique to the Palico platform. We look forward to the ongoing support from the Palico team to move these LP interactions forward.

Spruceview is proof positive that outsourcing fund manager selection still makes good sense. Funds of funds that unlock access to managers that would otherwise fly under the radar of LPs have a highly competitive niche in the market.

But to succeed, LPs must first be aware that the opportunity exists and then understand what makes the strategy so special. So far, the results speak for themselves. Spruceview recently extended its Palico subscription so that we can continue to support them in their journey towards their final close.