Source: Ferguson Partners analysis of Preqin data (real estate funds, excluding fund of funds and secondaries).
Background & Context
2023-2024 represented a historically challenging period for real estate capital raising. For sequential fund managers who may have been in between capital raises during the post-COVID boom of 2021-2022, this drawdown has been particularly frustrating. Indeed, 2024 represented a 12-year low for aggregate commitments to real estate. As such, these macro headwinds have amplified pressure and performance expectations for capital raising teams across our industry.
At Ferguson Partners, our real assets focused strategic consultancy and talent management business has had a front row seat to these challenges. In fact, we have played a key role in helping our clients navigate through this period. Our clients have entrusted us to help them ensure their capital raising teams are structured and resourced effectively, designed incentive structures to keep fundraising teams motivated and aligned, and ensured they have the top talent necessary to compete.
Through our work and study of the real estate industry, we have seen what works and what doesn’t when it comes to raising capital in an ultra-competitive market. Taking these observations from across our business units, we sought to answer for ourselves what “excellence” looks like in capital raising. Now, for the first time, we have decided to share these insights publicly. We have broken out our research into four fundamental categories: talent, teams, operations, and incentives:
Part I: What does great capital raising talent look like?
Part II: How are great capital raising teams organized and resourced?
Part III: How do great capital raising teams operate?
Part IV: How do you effectively incentivize great capital raising teams?
Our hope is that these insights will be helpful to your organization and in particular those who are struggling to raise capital. For more information or to discuss how these learnings can best be applied to your organization, please send us a note. We’d love to hear from you.
Read time: 4 min
Part I: What does great capital raising talent look like?
Our executive search leaders are asked all the time: “Which individuals in our industry are the best in the business when it comes to raising capital?” While this is an interesting question, a more consequential question might be: “What are the common traits that define excellence in the capital raising function?” and “How can we identify and develop talent internally?”
Through our collective experience in the search business and through rigorously studying organizations that outperform their peers in raising capital, we believe that there are a number of formative career experiences, traits, and behaviors that characterize top capital raisers.
Background & Early Career Experience
At its best, capital raising requires a unique blend of real estate investments and product knowledge with the ability to tell a clear, compelling story that will resonate with investors. Unsurprisingly, from our study of the career arcs of top capital raising talent, there is no singular recipe that leads to the development of top performing capital raisers, but there are some interesting patterns that emerge:
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Formative, early-career investments or analytical experience (3-5 years) that demonstrate intellectual curiosity, hone analytical skills, and create opportunities to “think like an investor.” Common starts include consulting, investments underwriting, asset management, or leasing positions.
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Mid-career transition to business development, client relationship management, and investor relations. Usually a self-selection or manager-led development pivot that reorients strong, articulate, young professionals with some level of “grit” to a more client facing role. From here it typically takes one to two years of reps to build confidence, learn investor preferences and refine product knowledge and messaging. Most develop 5-10 years of experience here in a junior or mid-level capital raising role, steadily building relationships, and covering progressively larger investors before becoming a “senior” capital raiser responsible for coverage of a specific territory/region.
Traits Skills and Behaviors of Top Performing Capital Raisers
While our research shows that early career experience in analytical or investments roles can be useful building blocks for a career in capital raising, it is equally important to understand the traits and leadership behaviors that top performing capital raising talent exhibit. Once named, these behaviors can be cultivated and reinforced by capital raising leaders. Our study and observations working with top performing capital raising teams has identified a number of critical traits that underly success:
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Relationship Building - While product performance is the number one factor investors consider when choosing a manager, the number two, stated or not, are relationships. Investors want to invest with people that they like and trust. Building relationships takes time, energy, and authenticity, skills that can be refined but never built from scratch. You either like building relationships with people or you don’t. A genuine love for interpersonal connection, aptitude in remembering personal details, authenticity, and warmth all help to accelerate relationship building.
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Product Knowledge – the ability to sell without sounding like you are selling comes from first understanding and identifying gaps in an investor’s portfolio and then distilling complex strategies into a clear and compelling solution. This only comes from knowing a strategy inside and out. The best capital raisers know the details of their flagship products and seamlessly partner with product specialists when needed to go deep with investors on emerging or niche strategies.
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Creative “Hustle” – an ability to manufacture compelling reasons to meet with new investors, existing prospects, and current investors by bringing the full resources of the organization to bear. This may look like proactively sharing the latest research, major portfolio updates, and introductions to investment partners (CIOs, Portfolio Managers, etc.) who can add another layer of depth to a call or meeting. As with any sales position, the ability and grit to power through dry spells and get back on the plane to take another meeting when things aren’t going right are hallmarks of standout capital raisers. These “grind it out” traits coupled with creativity are a winning combination.
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Transparency & Teamwork – the best capital raisers are those that recognize that they are one piece of a collective ecosystem. They take the time to ensure that they maintain good Customer Relationship Management (CRM) software hygiene, foster transparency in their pipeline and priorities, and give proper context and support when engaging partners (Product Specialists, Portfolio Managers, Investor Relations/support personnel, etc.) At the same time, top capital raisers have a competitive edge, they do the right things and are helpful and collaborative but also want to “win.”
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Polish & Personal Brand – in a line of business where first impressions matter, the best capital raisers look the part of a confident, poised advisor. Investors expect to see polished communicators with backgrounds that lend credibility, while also bringing forth a high degree of cultural fluency and adaptability. The best capital raisers embrace the idea of continuous improvement and continually seek peer feedback in refining their messaging and approach.
Can “Excellence” be Measured?
In a heavily production-based industry where capital is the lifeblood, one may think that “dollars in the door” is the be-all-end-all metric for defining “excellence” in capital raising. Unfortunately, that is not the case. In reality, there is not a singular, all-encompassing metric that can be used to evaluate capital raising talent. Macroeconomic conditions, platform size, underlying product performance, sector cyclicality, and even investor coverage responsibilities all play a role in determining capital raising performance and lie outside of the control of an individual capital raiser.
This could be at least in part why many firms have shifted away from setting capital raising targets at the individual level in favor or regional targets or targets by product. Under this approach, capital raising leaders seek to build and encourage collaboration and teamwork amongst their capital raisers. Targets are either achieved or missed collectively. Instead of individual high-water marks, consistency over time, strong 360 team feedback, and a continuous desire to raise the bar for themselves and others are strong barometers of excellence.
That said, we know some of our readers will want to put a number on what is possible. When we looked at top performing capital raising firms, what they raise on an annual basis, and the size of their teams, we see that at the top end of the market, capital raisers are bringing in commitments of $500M-$1,500M USD on an annual basis. Note that performance amongst this group of firms is heavily oriented towards very large, global, multi-strategy real estate investment management funds raising for both open-end and closed-ended vehicles. As such, these are not metrics that are broadly applicable across our industry, but rather satiate the question of “what is possible?”
Capital Raising Talent - Putting it All Together
Raising capital is both an art and a science. Similarly, we believe that developing strong capital raising teams requires a delicate curation of complementary skills, experiences, and personalities that are greater than the sum of their parts. By identifying a profile of capital raising “excellence” capital raising leaders can begin screening for, cultivating, and reinforcing the types of behaviors that correlate to strong capital raising performance.
In Part II we will focus on the structures, resourcing, and critical activities that define excellence amongst capital raising organizations.
Read time: 7 min
Part II: How are great capital raising teams organized and resourced?
It is worth emphasizing that across the real estate investment management industry there are two primary models for raising real estate capital:
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The Centralized (or Generalist) Capital Raising Model – a capital formation team that operates at the parent company level of a diversified investment management platform. These teams raise capital across multiple asset classes (e.g., private equity, private credit, real assets, etc.) and typically engage as the primary point of contact with institutional investors and consultants on a broad, multi-strategy basis. Many of the investment managers that utilize this model also leverage real estate/real assets product specialists that provide deeper expertise when engaging with investors once opportunities have been identified.
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Dedicated (or Specialist) Real Assets Capital Raising Model – refers to a capital raising team that focuses exclusively on real assets (real estate, infrastructure, timber/agriculture, etc.) operating within firms that specialize in these asset classes. These teams often have deeper sector expertise, stronger relationships with real assets-focused investors, and direct regional coverage responsibilities as the primary point of contact with investors.
For the purposes of distilling best practices when it comes to constructing effective capital raising organizations, we have tried to generalize our research and observations to be broadly applicable regardless of the approach your firm utilizes. The reality is that there is no “one size fits all” structure: instead, the most effective firms understand the critical activities required to raise and manage capital and create
The Core Responsibilities of Effective Capital Raising and Investor Relations Teams
In simple terms, there are three critical activities that underpin capital raising and investor relations teams:
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Building relationships & securing commitments from capital
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Managing & supporting fundraising campaigns
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Servicing clients throughout their investment lifecycle
As firms scale, the criticality of specialization within these functions increases. For firms with several products in market concurrently across different strategies, capital raising is a perpetual endeavor. As such, it often makes good business sense to clearly articulate roles and responsibilities related to the three “legs of the stool”, given the different skill sets, experiences, and traits required to excel in each area. We will look at each of these functions in more detail.
Raising Capital
To optimize investor coverage density and travel efficiency, capital raising teams are commonly organized by geography. Based on our research and conversations with high performing capital raising teams, there are limits to how many individual investor names a capital raiser can effectively and meaningfully cover within their geography, typically only 40-60 in depth. This aperture of coverage ensures that capital raisers can be in front of their clients and prospects 2-3 times per year (recall that “creative hustle” and manufacturing reasons to meet is a key trait of the most effective capital raisers). Given the realities of investor coverage limitations, each region will typically have multiple capital raisers to ensure robust investor coverage and may even double up coverage in key markets to ensure sufficient coverage of both large-cap and mid-cap LPs. In the Americas this geographic segmentation is typically done across East Coast, West Coast, and Central regions. In EMEA, this may be by country or region (e.g. U.K., Germany, Nordics, Middle East, etc.), and in APAC, this is typically done by country (e.g. Japan, Korea, Australia, etc.).
Global capital raising teams are typically helmed by a “Head” of Capital Raising, who is responsible for overall performance of the team. Reporting to this individual is typically regional leadership (e.g. Head of Americas, Head of EMEA, Head of APAC etc.). While historically it has been common practice across the industry for Regional Heads to act as both a player (directly client coverage responsibilities) and a coach (sales management for their teams), our research suggests that, over the last several years, the most successful organizations have oriented these leaders to be coaches first and foremost. The emphasis on sales management and team effectiveness (particularly during times of market difficulty), is so crucial to effective capital raising that firms are willing to make the investment in these senior level positions without the expectation of direct fundraising contributions
In an active “coach” role, capital raising leaders take a primary and active role in setting and driving the regional capital raising strategy and KPIs for the enterprise. Crucially, this means prioritizing time around hiring and developing their teams (regular feedback, coaching, and mentorship), ensuring their teams are operating well internally and cross-functionally (alignment with fund teams, appropriate product knowledge, CRM hygiene, collaboration and communication on what’s working in terms of campaign strategies, marketing efforts, approach with investors), and seeking continuous improvement in responding to the dynamic market and investor landscape (leveraging data, technology, and automation to improve effectiveness). The importance of strong capital raising leadership cannot be underestimated.
A note on specialists
There are a few exceptions to the regional capital raising model that are commonly seen amongst high-performing, capital raising operations, especially those operating at scale.
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Consultant coverage – most prevalent in the U.S. market, many of the prominent investment managers have invested meaningfully in coverage of the consultant channel. With recognition that the competition for attention and dollars amongst the largest institutional pensions has ramped up significantly over the last decade, ensuring warm relationships with consultants who are often the gatekeepers of the mid and small-cap investor universe has become increasingly important. Dedicated consultant specialists are tasked with ensuring their products are top of mind for consultants and their clients globally. We expect to see more firms moving to a dedicated consultant coverage model over time as competition in the space continues to accelerate.
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High Net Worth (HNW) coverage – Under a similar premise, the growth of the HNW/RIA/Wirehouse channel has been hard to ignore over the last several years. Capital raising teams are taking note and are designing products and cultivating sales leaders specifically targeted to these channels, which often have different investment needs and require different messaging compared to traditional, institutional LPs. In an environment of increased competition for capital at the institutional level, the tailwinds and total addressable market of the high-net-worth space makes gaining access and traction amongst this pool of capital imperative.
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Product Specialists – As discussed, most diversified investment management platforms that operate a generalist salesforce will leverage real estate specialists to engage on real estate investment opportunities where appropriate. Building on this concept, real assets investment managers also leverage specialist resources from time to time to “go deep” on emerging or niche strategies outside of flagship offerings (e.g., credit, indirect strategies, listed securities, etc.). Usage of these resources is typically judicious with a ratio of regular capital raisers to specialists of roughly twelve to one.
Fundraising Campaign Management
If capital raisers are the front line for building relationships with investors and ultimately securing commitments, the fundraising management function is central command – responsible for marshalling resources in support of specific fundraising objectives. Sometimes referred to as product management or project management, the fundraising management team is the unsung hero for organizations raising capital across multiple strategies at scale.
Roles and responsibilities vary slightly from organization to organization for this group, but most critical activities coalesce around four core functions:
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Product launch planning – Coordination for critical legal, compliance, and planning activities (timelines, targets, prospect lists, and prioritization of investors) surrounding the launch of a new fund.
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Messaging, marketing, & sales support – Collaboration with the sales team to ensure clarity and articulation of fund strategy, ongoing refinement of messaging and fundraising tactics, support for marketing collateral, and understanding of competitor offerings and counter positioning
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Ownership of RFP & DDQs – Execution of RFP/DDQs commonly falls under the purview of the fundraising management team. In recent years, however, many of the largest investment management platforms have leveraged their scale and created dedicated RFP/DDQ teams solely dedicated to supporting these routine responses across the platform. The RFP/DDQ area is well-suited for the application of AI and automation tools to enhance both efficiency and effectiveness and is an area where many scaled platforms are experimenting.
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Tracking & reporting progress – Strong project management is critical to successful fundraising efforts. Responsibility for keeping track of fundraising progress, closing timelines, and ensuring prospects are being covered effectively often falls within this function. Further, these teams play a leading role in facilitating communications and progress reports between capital raising and fund teams.
A strong fundraising management group is critical for harnessing and maximizing the potential of a capital raising organization, yet it is the area that is most often overlooked. This could be in part, because it is tricky to get right. Strong project management personnel blend marketing savvy, strategic acumen in targeting the right investors, organizational skills, and attention to detail, along with the ability to communicate effectively across an organization to marshal resources effectively.
Caring for Clients
Last but certainly not least, servicing investors is table stakes for any investment management platform. For the sake of clarity, when we refer to investor relations activities, or “servicing investors” in this context, we are referring to the standard and regular activities involved in reporting, communications, and administration of investors over the normal course of their investment lifecycle.
There are two common approaches to organizing and resourcing activities related to investor relations:
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The embedded model – investor relations activities are performed under the umbrella of the capital raising organization and fall under the purview of the Head of Capital Raising.
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The distributed model – investor relations activities are organized outside of the capital raising function. This may be look like a standalone team (reporting to a different leader than the Head of Capital Raising) or an operating model where core activities are dispersed across the organization (e.g., reporting activities embedded within fund teams and a small, centralized team focused on administration and communications).
In either model, the most effective organizations are those that are intentional about distinguishing fundraising support from investor relations. While there can be a temptation to divide investor-facing activities between capital raising and “everything else,” the fact of the matter is that both sets of activities are foundational to achieving long-term capital raising success.
Offshoring
Increasingly, in an effort to reduce support costs, many of our clients are experimenting with automating or offshoring basic and routine client support and administrative activities (e.g., address changes, bank account change requests, document retrieval, capital call and distribution notices, etc.). We fully expect firms to continue to experiment with bifurcation between the activities that require human judgement (communications, regular fund messaging and reporting) and those lower-value administrative functions that are well-positioned for automating or offshoring over time.
Key Takeaways – Organizing a capital raising team
Going forward, we believe that building a high performing capital raising and investor relations organization that is agile, resilient, and competitive centers on two core themes: specialization and sales management.
The organizations that have found the most success over the last few years have been those that have deployed specialization strategically: whether that means adding dedicated capital raisers solely focused on the consultant or the HNW channel, or those organizations that have stripped away low-value, administrative tasks from investor relations. The key is to ensure that each “leg” of the stool: raising capital, managing campaigns, and servicing investors, has the required resourcing, talent, and focus to be impactful.
Further, the shift we have observed, particularly amongst the largest asset management platforms, in moving from a “player/coach” model to a more focused “coaching” approach is a notable deviation from the historical playbook for senior leadership in the capital raising space. The importance of active management, coaching, talent development, and team building is a full-time job and is increasingly being recognized for the value it unlocks at the team level.
Read time: 6 min
Part III: How Do Great Capital Raising Teams Operate?
In Part III, we turn our attention to how top capital raising organizations operate and excel in working together across the entire capital raising apparatus - from initial product ideation to prospecting leads and ultimately securing commitments.
Product Development
Capital raising is influenced by a whole host of variables: impromptu trade wars, brand perception, track record, and the strength of the investments team all play their part. However, the most decisive factor is simple: having products investors actually want. Yet, many firms still treat product development as an afterthought.
There is little doubt that having the right product architecture - that is, the right selection of investment products, may be one of the most important factors influencing capital raising success. One has only to speak to any office-oriented manager about how they have found the latest fundraising cycle to validate this. Despite the importance of product-market fit, only about 60% of scaled, multi-strategy investment platforms make product development a full-time job within their organization1.
Dedicated product development resources are critical not only for leading the conceptualization of new products that are accretive to the business, but also securing buy in from stakeholders, strategizing launch timing and investment thesis, working through legal, compliance, and risk management, and ultimately overseeing successful product launches.
We previously worked with a global investment manager facing the consequences of leaving such an important activity without clear organizational ownership. As their platform scaled across markets and the business diversified, the lack of centralized product leadership created a chaotic product suite. Overlapping strategies, inconsistent application of vertical integration, and multiple closed-end funds in market simultaneously were stretching sales teams thin, muddling sales pitches, and limiting the effectiveness of their capital raisers.
Our diagnosis was clear: product development had become a “corner-of-the-desk” activity owned by no one.
How did we help? We transformed their approach to product development by benchmarking their practices against industry-leading peers and identifying critical gaps. We then designed a dedicated product management function tailored to their unique growth ambitions, defining how this role would integrate across the organization, enable cross-functional coordination, and drive measurable fundraising outcomes. Beyond structure, we equipped them with the governance tools and performance metrics needed to ensure accountability and strategic alignment. While the ultimate success will hinge on selecting the right leader, we’ve already reshaped their operating model to instill greater discipline, clarity, and focus. The takeaway is clear: for multi-strategy platforms at scale, world-class product development is not a luxury - it’s a strategic imperative that demands dedicated ownership.
Prioritizing Products
For firms with broad offerings and global reach, strategic product prioritization is just as critical as a well-run product development process. Without clear focus, even the best sales teams can find themselves stretched in too many directions, diluting both effort and impact.
In conversations with over a dozen heads of leading institutional real estate managers, the message was consistent: prioritization matters. Roughly 85% of the leaders we spoke with actively rank and sequence product focus across their capital raising teams, reviewing priorities at least semi-annually - often quarterly.
The prioritization criteria is often multifaceted:
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Strategic platform relevance: Does the product align with the strategic direction of the firm?
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Market-specific demand: What’s resonating in key regions or investor segments?
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Differentiation: Do we have a clear performance or capability edge?
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Timing sensitivity: Which products are working towards a close date vs. those that are open-ended?
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Resource alignment: Are we set up to support this product effectively?
Through our advisory work, we’ve cataloged several frameworks for product prioritization available to our clients, but the most valuable principle is simple: if everything is a priority, nothing is.
Clear Rules of the Road for Engaging Partners
As we discussed earlier in the series, top-performing capital raisers excel at leveraging the full platform to deepen investor relationships. A critical part of that strategy necessitates involving product specialists, portfolio managers, and research leads at the right moments to elevate conversations with strategic clients.
But doing this well requires more than instinct. It demands clear expectations and internal alignment around how and when to engage these partners.
Leading firms establish “rules of the road” or internal service level agreements (SLAs) that define:
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When to involve partners: What qualifies as a high-impact opportunity?
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How to prepare them: What context, materials, and meeting support are expected?
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What they can expect in return: Is their time respected and well-leveraged?
This approach removes guesswork and helps cross-functional teams operate as a cohesive front. It also ensures that internal collaboration doesn’t break down under the pressure of competing incentives or ambiguous roles. Best-in-class organizations formalize these expectations through top-down leadership mandates. They define roles and responsibilities clearly, carve out time for pre-meeting dry runs, and reinforce a culture of alignment between investments, capital raising, and fund teams.
When well-executed, these routines don’t just improve internal coordination, they elevate the investor experience and differentiate the firm in increasingly competitive markets.
Sales Management & CRM Accountability Mechanisms
While people alignment is critical, technology also plays a critical role in any high performing capital raising organization. Customer Relationship Management (CRM) systems are one of the most powerful tools in a capital raiser’s arsenal, when used properly. They bring structure, visibility, and accountability to the sales process, making it easier to manage pipelines and prospects, coordinate across fund and investment teams, and drive strategic follow-ups with investors. However, CRM systems are only as good as the data they contain, and this is where many firms fall short.
Top capital raising organizations are rigorously disciplined about CRM hygiene. They make it clear: while support staff may be responsible for CRM data entry, capital raisers - not support staff, are ultimately accountable for the accuracy and completeness of meeting notes, lead qualification, and next-step tracking in CRM tools. In fact, some firms even incorporate CRM compliance into end of year bonus evaluations for their capital raisers.
Why? Because, these organizations understand that CRM is not just a database, but rather a living, dynamic resource that supports sales coaching, prioritization, capital raising efficiency, and broader organizational learning. A well-maintained system enables sales managers to lead more effectively, identify trends and risks early, and provide tailored coaching that moves the needle towards meeting targets and delivering on fundraising goals.
The best firms embed CRM usage into the rhythm of the business. It’s not optional; it’s how work gets done. And that clarity pays off in better execution, higher transparency, and faster, more coordinated responses to investor needs.
Training & Continuous Improvement
One of the most consistent values we observe in high-performing capital raising teams is their commitment to continuous improvement. Despite having highly seasoned professionals on the team, these groups rely on more than just experience, they invest in training, feedback, and skill development as a core part of their culture. This looks like:
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Annual multiday offsites focused on mock pitches, peer reviews, and storytelling refinement.
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Regular product knowledge audits to ensure fluency across strategies.
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Ongoing sales coaching sessions where managers review real-world interactions and offer targeted feedback.
Importantly, this isn’t viewed as remedial, it’s a competitive advantage. These organizations know that in today’s crowded fundraising environment, the ability to communicate clearly, persuasively, and insightfully can be the difference between a pass and a commitment.
In short, great capital raising organizations don’t just hire great people, they help them get even better. They treat training and coaching not as a one-off event, but as a consistent investment in future performance.
Key Takeaways – Capital Raising Operations
While strong capital raising talent and supportive team structures are important, organizations that succeed consistently across market cycles take a more holistic approach. They build cultures, systems, and ways of working that encapsulate the full capital raising lifecycle—from early product ideation to securing investor commitments. This requires active management of product prioritization, clear collaboration protocols between partner teams, disciplined CRM practices, and a commitment to training, development, and continuous improvement.
Read time: 4 min
Part IV: How to Incentivize Top Capital Raising Teams
In today’s challenging capital raising environment, securing top fundraising talent can be nearly as difficult as securing the capital itself. This is why capital raising leaders dedicate significant time to designing effective incentive structures for their teams. Compensation strategies must be attractive, competitive, aligned with business goals, and capable of retaining talent over the long term—a demanding task.
So how do leading organizations approach this challenge? We examined a number of high-performing firms to identify best practices.
Capital Raising Incentive Structures
On the surface, compensation packages for fundraising professionals seem unremarkable within the world of real estate investment management. A base salary, an (often substantial) annual bonus, and modest LTI at the senior levels are all commonplace in the industry. However, underlying this seemingly innocuous incentive structure is a fierce debate – what is the optimal approach to determining individual bonus payouts?
There are two competing philosophies at play to determining annual bonuses - the “eat what you kill,” production-centered approach (e.g., basis points on capital raised) vs. the discretionary/multi-factor approach (considering individual performance as well as a multitude of other factors, with final payments at the discretion of leadership).
For some firms this decision is easy - it has already been made for them by the SEC. Under current regulations, RIAs are not allowed to pay commissions to employees, although some firms still mimic the economics of a production-based bonus. (Note: we are not a law firm and do not provide legal advice or regulatory guidance. Our insights should not be construed as a substitute for legal advice).
For those firms that are free from regulatory restrictions and have both options available to them, the million-dollar question remains: is one structure more effective than the other?
We think so – and in fact, we believe that when used thoughtfully, discretionary bonus philosophies can lead to better long-term retention and more productive, collaborative capital raising teams. We have found that the “discretionary” label is a bit of a misnomer, implying that bonus determination is arbitrary when it is quite the opposite. Indeed, many top performing firms have realized that these structures can reinforce desired behaviors and outcomes within their teams more effectively than a strictly formulaic, production-oriented approach.
1 Based on a Q4 2024 Ferguson Partners study of 20+ global investment management platforms.
Annual Incentives – The case for the “Disciples of Discretion”
When looking at the firms that have been successful in raising capital across market cycles, the vast majority subscribe to (and are strong advocates for) the “multifactored” discretionary bonus philosophy. We have fondly labelled these folks disciples of discretion and endorse this approach for a number of reasons:
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Greater emphasis on team performance - The best capital raising organizations recognize that a strong team is greater than the sum of its parts, and that the importance of winning and losing as a team is critical to building a collaborative culture. Yes, individual performance matters and should be acknowledged, but strong fundraising should not outweigh behaviors that detract from team cohesion and success.
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Flexibility – A production-based approach leaves little room for holistic evaluation of a capital raiser’s broader business contributions. Mentorship, “assists” on key wins, cross-functional collaboration, leverage of organizational resources, and professional development are easy to factor into a discretionary bonus program.
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Formulas can be flawed – Some firms have experimented with commission-like reward structures that offer higher incentives for capital that has a “high degree of difficulty” or is strategically important, but in practice, dialing in the appropriate parameters for effective adjustments requires finesse. Further, and even more importantly, it runs the risk of incentivizing behaviors that may be at odds with what is best for investors.
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Smooths volatility – Formulaic bonus structures are often highly volatile and reliant on macro factors outside the control of individual employees. These headwinds can result in mismatches between effort and reward - in a down market, capital raisers are often putting in more work to win fewer commitments. How do organizations solve for this? Accrue dollars in good times to smooth out compensation volatility in a down market.
Discretionary Bonus Criteria
Most organizations set annual capital raising goals by product, region, or individual (though the prevalence of individual targets has declined over time). Performance against these goals is a key factor in bonus decisions. Under a discretionary bonus approach, firms formally or informally consider company-wide results, team performance, and individual achievement relative to targets.
Further, this approach also allows firms to account for a range of other factors, including things like new investors brought on to the platform, commitments to strategic mandates, 360 feedback from colleagues, maintenance of CRM tools, and professional development, among other considerations that are relevant and important for driving team performance and business success. An illustrative example of a capital raising bonus assessment is below:
Notably, many firms defer some portion of capital raising bonuses (usually 20-40%) over a period of three to four years. This provides a retentive element to the annual bonus (“golden handcuffs”) and further smooths compensation volatility over time.
Long-Term Incentives
While bonuses are typically the largest component of capital raiser compensation, many firms also offer long term incentive awards selectively within the capital raising team. Carried interest is the most common currency, but eligibility tends to be narrow within the function (i.e., limited to Heads of Capital Raising and select senior-level professionals). Some firms also grant cash-based long-term incentive awards or stock-based awards to senior employees.
While carry is a currency highly desired by capital raisers, it serves primarily as a retentive mechanism rather than a motivational tool. For practical purposes, fundraisers have limited ability to influence real estate returns (and increase the value of their carry) through direct action.
Putting it all together – creating an effective incentive structure for capital raising
Fundamentally, compensation structures within capital raising organizations should be 1) linked to capital raised 2) retentive and 3) flexible enough to incentivize and assess a wide variety of desired behaviors.
Conclusion
At Ferguson Partners, our team of advisors are experts when it comes to helping our clients get the most out of their capital raising teams – whether that is finding the right talent, improving the effectiveness of their teams, or helping to create incentive structures that create alignment across the business. We thank you for reading along on our series on capital raising excellence and would love to hear from you what concepts resonated and might be applied within your own organization.
Further, if you’d like to discuss the concepts covered in our series, please reach out to us to find time to speak.
Authors:
Mike Cordingley – Managing Director – Leadership & Management Consulting
Scott McIntosh – Director, Compensation Consulting
Sarah Kennedy – Associate, Management Consulting
Emily Brown – Senior Associate, Compensation Consulting
Disclaimer
The views expressed in this article are those of the author and do not necessarily reflect the views of Ferguson Partners or its clients. This article is intended for informational purposes only and should not be construed as legal, financial, or investment advice. While every effort has been made to ensure the accuracy of the information contained herein, Ferguson Partners makes no representations or warranties regarding the completeness, accuracy, or reliability of the content. Readers are encouraged to seek professional advice before making any decisions based on the information provided.
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