A growing list of demands by large institutional investors when investing with unlisted asset managers is making them increasingly picky in their partners.

Alignment of values, co-investments, joint-partnerships, strategy caps and fees that reduce with scale were all cited as essential by portfolio managers speaking at the Conexus Financial Private Assets Conference.

Barry Brakey, head of property at the Future Fund, said his team favoured managers that could offer multiple means of investing, ranging from co-investment, joint venture and separate accounts. “We try and build on the relationship and make it richer and even moving on when we find that a manager’s focus is too narrow and cannot move in that direction,” he said.

In such relationships the Future Fund is playing a closer role in advising the manager, to encourage them not to overload particular strategies. “Managers have to stay on their reservation,” said Brakey. “We have given a little more to a manager to encourage them to stay under size, say $1 billion (in a strategy).”

Charles Woodhouse, deputy chief investment officer of QSuper, said that his fund had done the same for unlisted asset managers.

His team also has an arrangement where it tries to ensure that it does not have multiple managers bidding for the same asset. “We have arrangement that makes sure the right manager is competing for an asset,” he said.

To make such relationships work, Woodhouse said QSuper had to be well resourced enough to quickly respond on buy and sell decisions within “fund manager time frames”.

Grant Harrison, investment manager private assets at Cbus, said he favoured managers that could scale a mandate along with their growth and reduce fees for their size.

He saw these deals as increasingly acting as partnerships where they would have a role in the governance of the assets, possibly acting on the advisory board of the fund vehicle or as a director.