Why a Placement Agent?
For the general partner of a private equity, venture or public markets fund
· A key intermediation role in the market place: A considerable 60% of investors have committed to funds managed by firms that have initially approached them through placement agents. 20% of investors have frequently made commitments to funds pitched to them by placement agents*
· Essential in the emergence of innovation: most investors (92%) say emerging fund managers had utilized placement agents to approach them*
· Key to access specialist investor categories or country markets: Rare are the fund managers which have the resources required to follow up every investor markets or segments around the world. Save for the largest private equity firms that can maintain large investor relations' teams, using placement agents may be the only way to reach a highly domestic investor market or strongly relationship-based investors like family offices
· Second to nonlocal investor knowledge: Certain placement agents have unbeatable knowledge of certain local markets
For the manager of a mutual or alternative investment fund range
The promotion of an open-ended mutual or alternative investment fund range by an external sales team, or Third-Party Marketing, has several strong advantages:
· Placement Agents enables fund managers to enter new foreign markets with very little business risk by comparison to setting-up a local team or to acquiring a local fund management company, both development modes implying respectively substantial recurring fixed costs before any revenues are generated or substantial initial capital investment
· Following up markets with a strong domestic culture with a sales team headquartered abroad & going to and fro, has often proven its lack of efficiency compared to the use of a Third Party Marketer’s team who is highly connected and regarded as part of the local market
· The Placement Agent brings to an asset manager a deep knowledge of a local market and its participants and to local investors the closeness and local presence that are essential to the creation and development of relationships with a new fund manager
· Fund managers profit from the Third-Party Marketer’s portfolio of relationships with local investors and sharp expertise in the promotion of sophisticated and plain vanilla products as well. The latter has a long history of relationship with local investors in the markets in which it is based as well as a second-to-none expertise in the tenders originating from such markets
· Placement Agents are a valuable option for an asset manager to access or enhance penetration in markets which are perceived as restricted to foreign competition, with high barriers to entry, non-core or risky
* source: Preqin research report, poll of 50 prominent US institutional investors