Inside the Allocator’s Mind: What 300 LPs Want from Private Market Managers

Last week Bryan Hedrick, CFA, CAIA - Portfolio Manager for the DFW Airport Retirement Funds - joined Phronesis’ Stephen Whitten to bring fresh, practical context to our research on How Allocators Select Private Market Managers.

The study surveyed 300 US institutional LPs representing $1.3 trillion in private markets AUM, combining in-depth qualitative interviews with a Q4 quantitative survey to put hard numbers around how selection decisions really get made.

Our webinar explored:

• Where LPs source manager intelligence
• Why LPs are not looking to consolidate their manager relationships
• What are the true “table stakes” — and what differentiates firms
• The signals that genuinely build trust and long-term credibility
• What ultimately tips the balance in final selection decisions

To watch a recording please click on the link below.

Key takeouts from the session included:

LPs aren’t consolidating - they’re broadening
Contrary to popular belief, LPs are not looking to consolidate. While consolidation is often discussed on the GP side, LPs in private markets are not rushing to “do more with fewer managers.”

“I would prefer more rather than less.”
Bryan Hedrick, CFA, CAIA - Portfolio Manager for the DFW Airport Retirement Funds

 

Our survey shows an average of 22 GP relationships per LP, but more respondents expected to increase manager count than reduce it and Hedrick reinforced the point. As a team of one he works with 50+ private market managers and prefers more rather than fewer relationships because every vintage year and market cycle introduces new opportunities, and sometimes new specialist partners. In his view, the administrative burden doesn’t scale linearly with manager count, especially when private assets aren’t monitored day-to-day.

Performance gets you on the list - expertise wins the mandate
Perhaps the most commercially important insight for fundraising is how LPs rank decision making drivers. In the research Phronesis’ key driver analysis found proven sector expertise as the single most influential factor (roughly 16% of selection influence), ahead of performance.

“Honestly, performance is a check the box.”
Bryan Hedrick, CFA, CAIA - Portfolio Manager for the DFW Airport Retirement Funds

 

Crucially allocators want to understand why performance exists - sector depth, differentiated deal flow, repeatable underwriting, and a process that holds up across cycles. That naturally leads to the hardest variable to “prove”: people. Hedrick described manager assessment as part science, part art - a judgement that comes with time in the role. But he also noted that truth is discoverable: attribution, references, and CIO conversations can validate whether a GP’s narrative matches reality. LPs talk with each other a lot.

Communication is table stakes - honesty is the differentiator
Transparent communication ranked lower than many managers might expect but still mattered. The nuance: LPs don’t need more words; they need fewer surprises. Hedrick highlighted the rise of data portals as a major quality-of-life improvement, reducing friction and unnecessary back-and-forth.

“When things get uploaded into a data portal that just makes everybody’s life easier.”
Bryan Hedrick, CFA, CAIA - Portfolio Manager for the DFW Airport Retirement Funds

 

For Hedrick quarterly calls are generally sufficient once capital is committed but responsiveness matters. Above all, the message was simple: don’t sugarcoat drawdowns. In private markets, credibility compounds when managers communicate like partners, not vendors.

Whole-of-market firms: open door, higher bar
The discussion also tackled “whole-of-market” managers (large firms with public-market heritage). LPs see potential advantages in scale and access, but skepticism remains, especially when a long-standing public manager suddenly pivots into private strategies without a credible track record or purpose-built team.

“If it’s a company that has been historically public markets for 30, 40, 50 years… I’m probably going to take that with a grain of salt.”
Bryan Hedrick, CFA, CAIA - Portfolio Manager for the DFW Airport Retirement Funds

 

Like many, Hedrick is always willing to listen, these brands carry weight and may spot niches others miss, but he expects clear proof of commitment, structure, and focus.

What tips decisions: need, relationships, and signal-to-noise
For sophisticated “power allocators,” the immediate hurdle is often not persuasion, it’s relevance. Hedrick described relationship-building as a long game: a decade of short annual touchpoints can pay off when a need finally crystallizes. He also underscored the ongoing role of consultants as a “necessary evil” in the ecosystem. Ignoring them is not a strategy.

“It did make the allocation, the diligence process easier, because I knew they could fill that need because I’d known them for 10 years.”
Bryan Hedrick, CFA, CAIA - Portfolio Manager for the DFW Airport Retirement Funds

 

The DC Question: Opportunity or Structural Mismatch?

One area attracting enormous industry attention is the expansion of private markets into defined contribution (DC) plans and the broader wealth channel.

Here, Hedrick offered a cautious perspective. While the narrative around democratization is compelling, he expressed serious reservations about structural mismatches, particularly around liquidity. DC plans are built around daily pricing, participant choice, and portability. Private market strategies, by contrast, rely on extended lock-in periods, valuation subjectivity, and controlled liquidity.

“The structures just have a fundamental misalignment that I think is going to be very hard to make it work.”
Bryan Hedrick, CFA, CAIA - Portfolio Manager for the DFW Airport Retirement Funds

 

That tension is significant. From an allocator’s perspective, adding illiquid private assets to a structure built around flexibility and regular access creates practical complications — from liquidity management and pricing to oversight and compliance. While large asset managers may see a meaningful growth opportunity in the DC market, many institutional decision-makers question whether these structures are genuinely suited to the needs and long-term outcomes of plan participants.

For GPs, this means that while the wealth market may represent growth, institutional LPs will continue to apply a high bar to product design, liquidity terms, and alignment. Simply repackaging institutional strategies will not be sufficient. Structural integrity matters as much as return potential.

What This Means for 2026 Fundraising:
Fundraising in 2026 will require focus and discipline. Investors are not broadly reducing the number of private market managers they work with, but they are selective about where they allocate.

A strong track record is expected, but it is only the starting point. LPs want to understand a manager’s sector expertise, how the investment process works in practice, and why it should continue to deliver across different market conditions. Clear and consistent communication builds confidence, particularly when performance is under pressure.

For experienced allocators, the key question is whether a strategy fits a defined portfolio need. If it does not, the conversation may continue, but an allocation is unlikely in the near term.

In a more crowded market, managers who are specialized, transparent, and patient in building long-term relationships will be better positioned to secure commitments.

Get in contact:
Our full report “How Allocators Select Private Market Managers: Insights from 300 US Institutional Investors” is now available. If you’d like more information or a tailored briefing for your team, please contact  Stephen Whitten, Practice Lead – Asset and Wealth Management.