The Trust Equation: How to Keep LPs Through a Downturn

The framework that helped one emerging manager go from an 18-month Fund I to a 30-day Fund II close.

When Everything Went Wrong

Raoul Felix Maier’s Fund I started beautifully. Their first seed investment became a unicorn within two years. The brand was established. Momentum was building. Then the COVID bubble popped.

Late stage valuations dropped 80%. Deal volume dropped 80%. The IPO window slammed shut and stayed closed for four years. Pre-AI investments in his portfolio suddenly faced disruption from AI competitors. This is the moment that breaks most LP relationships. Raoul used it to cement his.

The Trust Equation

Raoul’s firm has seven core values. Number one is “earn trust” with a verb before the noun. Trust is not a state. It is an action.

The framework he uses comes from David Maister’s trust equation:

Trust = (Credibility + Reliability + Openness) ÷ Self-Orientation

The denominator is the key. No matter how credible, reliable, or open you are, if LPs sense that you are optimizing for yourself rather than for them, trust collapses. For emerging managers, LP relationship management starts with keeping self-orientation close to zero.

Credibility: Say What Is Actually True

Credibility means saying only what you can support. Not what sounds good. Not what might reassure worried LPs. What is actually true.

“If things go bad, you could always say, ‘Yeah, this is just a downturn, but still it’s great and everything’s fine.’ But if this is not credible, then you will destroy trust over time.”

The temptation to spin bad news is understandable. But LPs talk to each other. They do their own diligence. Optimistic framing that does not match reality does not buy time, it burns credibility.

Reliability: Same Day, Same Format

Reliability is consistency in the small things. Raoul’s fund sends quarterly reports on the same day every quarter, in the same format, every time.

When LPs know exactly what to expect and exactly when to expect it, they stop worrying about what they might not be seeing. Reliability is not about grand gestures. It is about removing uncertainty from the LP relationship management process.

Openness: Highlights and Lowlights

The quarterly reports include both highlights and lowlights, named directly, without euphemism.

“We have a lot of conversations in the team sometimes when there’s tough news. Some people get scared. You might think, oh, you might hurt the fundraise. But it’s so important to do the right thing.”

When he discussed this approach at Emerging Institute, Adeo Ressi’s response was immediate: “This is the best thing you can do long term.”

Self-Orientation: The Trust Killer

The denominator matters most. If LPs sense you are managing communications to protect your next raise rather than to serve their interests, nothing else you do will compensate.

“It doesn’t almost matter what you do in the numerator. If the denominator is high, if you’re self-oriented, then you’re not going to have a lot of trust.”

The Payoff: Fund II in 30 Days

Fund I took 18 months. Fund II took one month. The re-up rate from existing LPs was near total. New LPs came from referrals, people that existing Fund I LPs personally recommended.

“Fund one, 18 months. Fund two, one month.”

This was not luck. It was the compound return on years of disciplined LP relationship management through a difficult market. The blessing was earned, quarter by quarter, report by report.

The LP Trust Checklist

For emerging managers navigating tough LP conversations, the trust equation offers a practical framework:

Credibility: Is what I am saying actually true? Would an LP who did independent diligence reach the same conclusion?

Reliability: Am I delivering information consistently? Do LPs know what to expect and when?

Openness: Am I sharing both highlights and lowlights? Am I naming things as they are?

Self-orientation: Am I communicating what LPs need to know, or what makes me look good?

The managers who survive downturns and build institutional funds are the ones who treat LP relationship management as a long-term practice, not a fundraising tactic.

---

Emerging Institute helps Fund I and Fund II emerging managers build the LP relationships and institutional infrastructure needed to raise Fund III and beyond. Applications for Cohort 4 are now open.

About The Author