More than half (54%) of funds closed in 2016 YTD employed a placement agent
Preqin’s latest research finds that with an all-time high of 2,845 private capital funds in market – encompassing private equity, real estate, private debt, infrastructure and natural resources – seeking a combined $920bn, firms are increasingly turning to the services of placement agents to attract investor capital and coordinate a successful fundraise. A record proportion of fund managers (54%) that closed a fund so far this year employed a placement agent to help navigate the congested fundraising landscape. If this trend continues, it will represent the fourth successive year in which the proportion of funds using placement agents has increased, rising from 44% for funds closed in 2012.
Established managers that have closed private capital vehicles since the start of 2015 have proved the benefits of employing a placement agent by achieving more successful fundraises. Sixty-three percent of these funds exceeded their target size compared to just 41% of experienced firms that did not use a placement agent. Placement agents also helped first-time fund managers to surpass their target size as 40% of first-time funds which did use placement agents exceeded their stated aim, compared to just 29% of funds which did not.
Other Key Private Capital Placement Agent Facts:
- Fund Types Using Placement Agents: Of private capital funds closed since the start of 2015, distressed debt vehicles represent the largest proportion (75%) of funds that engaged a placement agent, followed by buyout (71%). Venture capital (36%) and mezzanine (35%) firms were least likely to employ an agent.
- Time in Market: Among private capital funds closed 2015 – 2016 YTD, 23% of those assisted by placement agents reached a close within six months of commencing fundraising, compared to 14% of funds that did not use a third party marketer. However, similar proportions of both groups had been in the market longer than 18 months.
- Reviewing Placement Agents: Half of private capital fund managers review their placement agent when bringing a new fund to market, while more than a quarter (27%) will evaluate them at least once a year. Contrastingly, 13% of private capital firms will only review their placement agent when an issue arises.
- Changing Placement Agent: Over the last 12 months, the greatest proportion (67%) of private capital managers cited dissatisfaction with service as the reason they changed their placement agent. Other key concerns were pricing and changes in fund strategy as cited by 46% and 44% of firms respectively.
- Fund Manager Location: Data on funds closed since 2015 by region demonstrates that the largest proportion of placement agents were utilized by Asia-based fund managers (57%). In other regions, 52% and 54% of North America- and Europe-based managers respectively, used a placement agent.
“The increasing proportion of private capital fund managers engaging placement agents is indicative of the growing importance that these service providers hold within the industry. In such a competitive fundraising environment, the added expertise and assistance that these service providers can offer could make the difference in holding a successful fundraise or not.
Placement agents are particularly expedient for fund managers that typically raise the biggest funds in the buyout and distressed debt sector, as these larger firms look to outsourcing solutions for added agility and a more individual focus in their fundraising strategy. However, the quality of these services remains a contentious issue for managers, and they will be looking for assurances of effectiveness from their placement agents during their review processes.”
Christopher Elvin — Head of Private Equity Products, Preqin