Huh? An emerging manager closed above its cap?

What’s the recipe for success for an emerging manager looking to raise a fund despite heavy headwinds?

A lot of hard work mixed with keen strategy and proof you know how to bring results.

That was one of the themes from this week’s emerging managers conference hosted by Texas’ two giant public pension plans, an annual event that has become a must-attend for newer private equity firms and the allocators they want to meet.

New Heritage Capital’s Nickie Norris provided sage advice as the manager saw its fourth fund recently close at $438 million – exceeding its hard cap by 7 percent and well above its $350 million target.

A key first step was for New Heritage to have early discussions with its largest LPs to ask about their commitment timing while also exploring its portfolio in-depth and its planned exits in the coming future, Norris said.

Knowing who had available capital and when they could make it available went a long way in New Heritage developing its fundraising strategy. Norris said 75 percent of Fund IV’s raise came via re-ups from its biggest investors.

“That re-up rate was a huge piece for us to be successful. We had our LPs available to give us dollars during our shared timelines,” Norris said.

Well-timed strong exits also served as proof-of-concept that New Heritage’s investment thesis and in-house ability works. “It was really important for LPs to see those distribution dollars coming back,” Norris told conference attendees.

These factors combined to lift the fundraising potential beyond New Heritage’s Fund IV cap – a situation that frequently worries LPs concerned about an emerging manager losing its focus. But New Heritage convinced its established LPs that these new investors were of high-quality, strategic and could open up different avenues for the future.

Not one existing investor was opposed to New Heritage’s request to exceed its cap, she said.

“Our LPs felt that we were being reasonable and not greedy in exceeding the cap,” Norris explained.

We’ve heard throughout the past year just how hard emerging managers have it. It’s good to know there are newer managers who have had success. Hopefully it’s one others can match.

Hey hey hey! Are you headed to NEXUS next week? If so, come find me! I’ll be wandering around, hoping to meet some new people to talk shop, spill the tea and (especially) chat about my beloved Philadelphia Phillies. Also, you can always hit me up via e-mail (Gregg.g@pei.group) or here on LinkedIn.