Alan Pardee quoted in PEI Magazine
The placement agent business has been expanding into new areas to diversify its revenue base and better
cater to its customers.
At its core, the business of being a placement agent – helping firms access investors and raise capital – has
remained unchanged since the industry was created. There are several factors, however, that have made
these groups modify the way they work.
For one thing, the universe of limited partners has grown tremendously, which has made placement agents
indispensable to small and mid-sized general partners that can’t possibly know all of them.
Charlie Eaton, founder and managing partner at Eaton Partners, explains that for each fund his firm helps to
raise, it has to contact, on average, 200 to 300 institutions, just to end up with about 20 investors in a fund of
between $500 million and several billions. That translates into an ever-increasing number of points of
contact with LPs, and much heavier lifting on the part of placement agents.
“That’s a big change,” he says. “Thirty years ago, there were maybe 25 to 50 large institutions, mostly public
or private pension funds.”
At the same time, the number of fund managers has grown, and many of the vehicles are going after the
same LPs. “There are many competitive funds in the market and so it takes a lot of work and effort to secure
each commitment,” Eaton adds.
Another trend that has hit placement agents is the proliferation of in-house investor relations teams. Some of
the large private equity firms have built teams that are larger than a typical placement agent. But that
doesn’t mean the latter has become obsolete.
For those larger GPs, placement firms can help with an expansion in a specific country or with new products
they’ve never raised before.