Rethinking IR

The role of placement agents in fundraising has been increasing steadily in recent years. In a recent limited partner survey conducted by PEI Research, 50 percent of GP respondents said that they used a placement agent to raise their last fund. 

What will these managers do if the SEC bans placement agents from interacting with US public pension funds – a major source of private equity capital?

The SEC’s seeming determination to enact the measures is prompting many GPs to begin mulling ideas on how to reshape their investor relations and fundraising functions after the ban. For some, the ban might mean they have to hire an in-house investor relations pro for the first time. For those without the resources to support a full-time IR pro, other options exist. 

A PEI Research survey of limited partners’ attitudes on placement agents shows that 60 percent of them have no preference between interacting with a placement agent and interacting with a firm’s internal IR professional when learning about a fund opportunity. This gives GPs some flexibility in choosing how to rethink their approach.

One idea being kicked around is hiring temporary investor relations employees during fundraising. Some of these temporary IR pros might even be former placement agents; we’re already seeing plenty of placement agents land in-house at private equity firms these days (see “Helix loses Norton to Englefield” and “Pantheon brings placement agent in-house for client services”.) But as Jennifer Harris outlines in “The danger of in-house IR”, GPs need to be careful that the terms of those IR pros’ contracts are structured in way that doesn’t trigger regulatory obligations.

Another idea is to continue to employ placement agents for the many functions they can still provide other than making introductions. As one placement agent points out, “placement agents don’t just serve as ‘introducers’ but have always had a variety of marketing roles”, including helping with assembling pitchbooks, developing marketing strategies, and assisting in LP negotiations. And of course, the ban only applies to US public pension funds, which means placement agents can still introduce GPs to corporate pensions, endowments, foundations, family offices, insurance companies, and funds of funds, as well as public pension funds in other countries. 

So perhaps there’s no reason for small teams to panic yet. But certainly it’s time to start thinking strategically about IR.