A private placement agent or placement agent is a firm assisting fund managers in the alternative asset class (e.g., private equity,Buyout firms race to spend cash piles
Financial News, 21 March 2011

infrastructure Infrastructure is the set of facilities and systems that serve a country, city, or other area, and encompasses the services and facilities necessary for its economy, households and firms to function. Infrastructure is composed of public and priv ...

, real estate, hedge funds, and venture capital) and entrepreneurs/private companies (e.g.,

start-ups A startup or start-up is a company or project undertaken by an entrepreneur to seek, develop, and validate a scalable business model. While entrepreneurship refers to all new businesses, including self-employment and businesses that never intend t ...

and growth capital companies) seeking to raise private financing through a so-called

private placement Private placement (or non-public offering) is a funding round of securities which are sold not through a public offering, but rather through a private offering, mostly to a small number of chosen investors. Generally, these investors include friend ...

Background

The placement agent acts as an intermediary between those seeking to raise money and those who may be interested in investing. They are typically mandated by

fund managers Investment management is the professional asset management of various securities, including shareholdings, bonds, and other assets, such as real estate, to meet specified investment goals for the benefit of investors. Investors may be institut ...

. A few placement agents are structured as groups within large

investment banking Investment banking pertains to certain activities of a financial services company or a corporate division that consist in advisory-based financial transactions on behalf of individuals, corporations, and governments. Traditionally associated wit ...

firms, but more frequently as separate boutique investment banks, sometimes captive to an Alternative Asset management group or specialist fund marketer. Placement agents will often seek to raise capital from a variety of

institutional investor An institutional investor is an entity which pools money to purchase securities, real property, and other investment assets or originate loans. Institutional investors include commercial banks, central banks, credit unions, government-linked co ...

s (e.g.,

pension fund A pension fund, also known as a superannuation fund in some countries, is any plan, fund, or scheme which provides retirement income. Pension funds typically have large amounts of money to invest and are the major investors in listed and priva ...

s, insurance companies, endowments,

funds of funds A "fund of funds" (FOF) is an investment strategy of holding a portfolio of other investment funds rather than investing directly in stocks, bonds or other securities. This type of investing is often referred to as multi-manager investment. A ...

, and sovereign wealth funds) as well as family offices and

high-net-worth individual High-net-worth individual (HNWI) is a term used by some segments of the financial services industry to designate persons whose investible wealth (assets such as stocks and bonds) exceeds a given amount. Typically, these individuals are defined ...

s. Some placement agents have an exclusive focus on a particular type of

such as US pension advisors for corporate and public

s. Placement agents are most often compensated through fees based on the amount of money raised (success fee) or supported by the fund or company they are actively representing (retainer fee).

Functions

Within the context of fund managers, placement agents can serve several functions: *Raise investor commitments to new

private equity fund A private equity fund (abbreviated as PE fund) is a collective investment scheme used for making investments in various equity (and to a lesser extent debt) securities according to one of the investment strategies associated with private equity ...

s – which might include targeting specific investors all the way down to a full service (advisory and marketing services). *Other services such as: **Strategic advisory **Marketing: creating marketing materials such as investor decks, coordinating roadshows and meetings with investors, answering due diligence questionnaires (DDQs) and request for proposals (RFPs) ** secondary market sales of investors' private equity funds interests for placement agents with a dedicated

secondary market The secondary market, also called the aftermarket and follow on public offering, is the financial market in which previously issued financial instruments such as stock, bonds, options, and futures are bought and sold. The initial sale of the s ...

advisory practice Within the context of private companies, placement agents typically focus on raising the following types of financing: *

Equity Equity may refer to: Finance, accounting and ownership * Equity (finance), ownership of assets that have liabilities attached to them ** Stock, equity based on original contributions of cash or other value to a business ** Home equity, the dif ...

financing for

and growth companies *

Mezzanine capital In finance, mezzanine capital is any subordinated debt or preferred equity instrument that represents a claim on a company's assets which is senior only to that of the common shares. Mezzanine financings can be structured either as debt (typicall ...

* Specialist financing such as government loans

Bibliography

*Wilmerding, Alex. ''Deal Terms''

References

{{private equity and venture capital Private equity Venture capital