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IR Profile: Altor’s Søren Johansen

by The Drawdown 21 August 2017

Founded in 2003 and currently investing from its fourth fund (€2bn, 2014 vintage), Nordic-based private equity house Altor has eschewed the widely embraced dedicated investor relations function. Instead, Altor’s IR efforts are handled collectively by the partner group, supported by the CFO office.
The Drawdown speaks to partner Søren Johansen about how IR is managed at the firm.

The Drawdown (TDD): What drove the decision to forego having a dedicated IR head?

Søren Johansen (SJ):
Let me first of all say that we are extremely dedicated to IR and investors – it is rather that we have chosen a slightly different set-up. Naturally, our firm has a large and skilled back office function that we invest in and expand on an ongoing basis, but it is part of our core philosophy that maintaining the relationship with our investors is a key partner function. As such, we have decided not to have an internal IR function taking care of the key conversations with our LPs.

It is mostly our partners, and particularly the senior partners, who spend time going out and meeting our investors, and who to a large extent also field the questions LPs might have at any given point.

That’s not to say we don’t have people helping with parts of what would typically fall under investor relations, but the partners are mostly the ones speaking to investors.

TDD: What does that approach to IR mean for Altor?

I think it gives us some advantages. I’d describe our investor base as blue-chip and having that direct contact gives us unique opportunities to constantly get insights into what’s going on in the global private equity industry: what the other accomplished firms are doing and what things we might be able to learn from them, which could be how to approach succession issues, IT investments, improving sourcing pipelines, and so on.

To have a dialogue with people who invest in a number of the world’s best GPs provides us with a unique opportunity to develop our knowledge. At the same time, it allows us to cement the relations we have with our investors, which we believe makes for a closer relationship in the long-term.

If you speak to our LPs, I think they’d say that they to a larger extent meet the partners and call them directly, rather than contacting the firm through an IR function – though less so if their query is about financials, such as quarterly valuations of a portfolio company or the like.

TDD: Who takes care of the financial reporting and conversations with LPs?

If you look at our internal organisational diagram, we don’t have a headcount dedicated to IR. The back office aspects of investor relations are handled by the CFO office, which is a function we continuously invest in, and add professionals and competences to. That said, those additions will likely be more and better back office IR, rather than hiring people to visit our investors and take care of the fund end of things.

TDD: How did Altor’s way of organising the IR function come about?

Altor has been around for 14 years now and has grown as a firm, but when it was founded it was just a handful of people, and back then you had to do the rounds with LPs yourself. That worked well for the firm and it has since sprouted from that.

TDD: Is each partner allocated a number of LP relationships to maintain, or is it less formal?

It is on more of a rotating basis, but really because we aren’t that big of a firm it becomes a bit ad-hoc. If I’m in the US, I may use that as an opportunity to meet the LPs Altor has Stateside, while other visits may be because we decide too much time has passed since we visited investors in a certain region.

We generally see ourselves as one firm, so tasks tend to land where we think they’re solved the best. There are only 30-something of us investment professionals, so we aren’t a large firm that needs to have rigid rules about who takes care of what, and I view that as a clear benefit.

TDD: How do you ensure the LP relationships remain strong despite employee attrition?

We try to develop our LP relationships such that they are relationships with the firm, rather than individuals – I don’t delude myself into believing that our investors committed to the fund just because of my blue eyes. Those who’ve been here from the start take the view that, regardless of how talented you are, you can’t deliver results without the entire firm being behind you.

One way we try to make sure our relationships with investors are firm-based is by exposing as many of our younger colleagues as possible to the LP base, at investor meetings and visits. I don’t meet LPs alone, but bring along a handful of my younger colleagues who then get a chance to meet them and get to know our investors, so it’s also made clear to our LPs that it’s the team and totality of Altor that creates value, not the individual partners alone.

TDD: Given the engagement the partners have with LPs in Altor’s setup, how do you balance IR needs with the deal- and portfolio management side of things?

That is a highly relevant consideration for us, and there is an ongoing evaluation of whether the effort we put into IR takes away from the deal side. It’s constantly an allocation of scarce resources, but so far our impression is that it still makes good sense for us to spend our time this way.

Also, given the investor base Altor has, it doesn’t take up a dramatic amount of time to answer a few phone calls from LPs or meet them for a cup of coffee. We don’t feel like we have unreasonably demanding investors who bombard us with questions; I think there’s a good balance.

Of course our primary objective and allocation of time is to create value in the portfolio, so if we at some point decide we have grown so big, and things have become so complicated that it starts to be an issue, then we would naturally have to do something about our approach. But we’re nowhere near that point yet.

Altor is still a relatively small firm and has a single product. I think it’d be different if we had a host of different product lines and therefore would be fundraising more often than we are. It’s not as though we’ve invented The Philosopher’s Stone and are much better than everyone else, but we’re a simpler firm in that sense.

Our approach to IR is the way we’ve always done it. Altor’s LPs are also aware of what is an effective way to allocate resources, so if they one day should find that we’re spending too little time on portfolio value creation, they will let us know. On the other hand, if they feel we’re straying too far from our investors, they would tell us that, too.

That’s the advantage of having the close dialogue that Altor has: it should hopefully mean that we’re constantly aligned with what is going on.

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