It’s worth hiring a placement agent when raising capital for private funds, according to research from alternative-assets data provider Preqin.
Established and first-time managers who used placement agents had more success in exceeding their fundraising targets compared to those going it alone, a Preqin report this month shows. Sixty-one percent of established managers surpassed targets for funds closed in the 18 months through June when using a placement agent, compared with 47 percent for those who did not.
Alternative asset managers turn to placement agents for help in articulating their strategy to investors and anticipating any potential due diligence concerns, according to the report. They are fundraising amid heightened competition for private assets, making it more difficult to differentiate themselves in a crowded market.
“Well-known managers that have a clean story with strong existing LP support — and spin-out groups with extraordinary stories — do get in and out of market quickly,” Michael Keaveney, managing director of Capstone Partners, said in the report. “But for the majority of managers, fundraising remains a difficult, unwelcome task with plenty of risk.”
Fifty-six percent of first-time fund managers who did not use a placement agent failed to meet their goals for their investment pools closed in the 18-month period through June 30, according to Preqin. Only 30 percent reported exceeding their targets, compared with 47 percent of first-time managers who used a placement agent.
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Credit Suisse Group’s placement agent business is the most prominent within private capital fundraising, according to Preqin. The report shows that Credit Suisse Private Fund Group has raised $386 billion since it’s been in the business, servicing 301 known private capital funds.
For funds closed from the beginning of 2018 through June 30, Greenstone Equity Partners was the top placement agent based on the number of funds it assisted, according to Preqin. Greenstone assisted 32 funds in attracting a total $17.9 billion over that period, the report shows.
Evercore’s private fund group helped raise the most capital, with Preqin tallying a total $38 billion for 16 funds closed in the 18 months through June 30. Park Hill Group was ranked second for both the number of private capital funds assisted and volume of dollars raised over the same period, while Credit Suisse was the third most active placement agent based on the number and volume of funds.
“Fundraising is not easy; it is one of the more exhausting, humbling and frustrating processes” that asset managers encounter, Keaveney said in the report. “A placement agent can seek early market feedback or, based on experience, provide guidance as to the likelihood of success in achieving desired goals.”