From Public to Private

Wendy Webb talks about her move from public company IR into the private equity sphere

It’s investor relations – but not like any investor relations you’ve ever known. During more than two decades at the Walt Disney Company, Wendy Markus Webb rose to senior vice president of IR and shareholder services. Today she handles IR for Tennenbaum Capital Partners (TCP), a private equity firm in Los Angeles.

After Disney and then a stint at Ticketmaster Entertainment, you had offers from major public companies to be a high-profile head of IR. Why did you choose such a different course?

At this point in my career, I wanted to try something new, something unproven, something less cookie-cutter. Public company IR is fairly transferable – interactions with sell-side analysts, quarterly earnings calls, industry conferences, and so on. For private investment companies, however, there’s no standardized approach. At heart, I’m a builder, and I welcomed the opportunity to build a more robust investor relations effort here at TCP.

Wendy Webb

Public companies have 10Qs, 10Ks and a host of other compliance demands. Do private equity firms have similar reporting requirements?

Some Tennenbaum funds are registered investment companies, which do make public filings four times a year, but our other funds aren’t required to. We’re still beholden to Regulation FD, however, and we don’t give material information to investors in an uneven manner.

Our investors watch our performance carefully. Most private investment companies mark their investments to the market quarterly, monthly or even weekly, and provide that information to investors. These valuations make a difference, particularly to our institutional investors and ultimately to their accounting. A corporation’s books can also be affected by the valuation of alternative investments in its pension fund, just as it is affected by fluctuations in its public equity holdings.

Are you talking to the same contacts on the buy side as public company IROs talk to?

Like most private equity firms, our funds are typically structured with 10-year lock-ups. As a result of the longer-term investment horizon and illiquidity, we tend to deal with somewhat higher-level people on the institutional side, and the conversations typically are more sophisticated.

Another reason we usually deal with higher-level individuals is our revenue model. It’s actually based on the fees paid by investors, plus a share of the investment returns we generate, so the relationship we have with an institutional investor is more consequential than if it was investing on the open market.

How did the global financial crisis and fraud such as the Bernie Madoff scandal affect private equity investors?

There’s definitely a new demand for transparency. For example, our biggest investors routinely send in their compliance folks to meet with our CFO and go through our files, much like an auditor would. Plus, part of my investor relations role is to oversee the completion of due diligence questionnaires and audit confirmations.

Private equity IR has a whole constituency public company IR doesn’t have: advisers like Cambridge Associates, Mercer and New England Pension Consulting, which investors hire to do deep-dive analyses and information gathering. We also have a password-secured investor portal, which I overhauled since arriving at Tennenbaum.

For our investors, it’s like going onto a brokerage website to look at their account, see how they’re doing, review historical information, and so on.

Does your job go beyond IR?

I’m part of the investment committee, so I sit in on its weekly meetings and stay on top of what we’re thinking about and what we’re investing in. If I have something to add – in the entertainment space, for example – I might pipe up with my opinion. But I was specifically brought in to TCP to elevate the IR function because of the increased demand for transparency from investors.

Another part of my role comes into play when we raise new funds, and having good ongoing IR with a sense of trust certainly helps then. IR is increasingly important as a way to foster the relationship with investors that allows for valuable ongoing access to capital, which is harder and harder to raise in these economic times.

It’s a fun new aspect of the job for me. We just closed a $530 mn fund in August, and I was intensely involved in that for the past year and a half. I worked in investment banking doing private placements before I joined Disney, so this really harkens back to my early training.

Are environmental, social responsibility and governance factors part of TCP’s IR story?

We have a number of college endowments and charitable foundations that invest with us, so we’re sensitive to their social responsibility needs.

Our corporate governance is much less visible than on the public company side. But at the outset, when an institution is considering investing millions of dollars with us, there are a lot of questions about governance in the due diligence process – like the long-term commitments of the leadership and key investment officers, or the structure and make-up of the board governing the fund.

Do private equity IROs have a professional association like NIRI?

I’d welcome NIRI broadening its mandate to include private equity IR – that would be very valuable. In the meantime, I’m trying to develop an informal network of private investment firm IR professionals to share ideas. For example, our clients tell us our investor portal is very helpful, but I don’t know how others compare. Plus, we send out quarterly investor letters with performance numbers and a macroeconomic outlook on the market, but not every firm does that.

We don’t currently hold regular conference calls with investors, but I’m considering doing them and I’m curious about what others are doing. Many private equity companies have an annual investor conference or annual meeting, talking about performance, showcasing investments and interacting with investors, so sharing ideas on structure and content would be interesting.

How do you think most private equity IR professionals get their positions, and which skills are especially useful?

It seems most work their way up through their firms or through financial services organizations generally. That makes me pretty unique in having come over from big company IR but I think there could be more opportunities for public company expertise to benefit the private side, for sure.

I certainly value my early investment banking training because I have to be conversant in the various financial securities a private investment fund might have in its portfolio – first lien term notes, second lien with penny warrants, DIP facility [a form of financing extended to debtors under the US Bankruptcy Code], mezzanine, and so on.

An IRO could walk into a public company and usually pretty quickly start talking about that company’s products or services, but the lingo around private equity can be somewhat more complicated.

That said, for people who are confident about their understanding of the capital markets and how various investors derive returns, crossing over from public company investor relations to private equity IR is definitely possible.

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