Placement Agent

What Is a Placement Agent?

A placement agent is an intermediary who raises capital for investment funds. A placement agent can go in size from a one-individual independent firm to a large division of a global investment bank. Professional placement agents are required to be registered with the securities regulatory agency in their jurisdiction, for example, the US Securities and Exchange Commission. A placement agent operating in the US must be registered as a broker or dealer.

Grasping Placement Agent

A placement agent serves a fundamental function in the fundraising market. Placement agents are recruited by investment funds (e.g., private equity fund, hedge fund, real estate fund, or other alternative assets) to raise capital rapidly and proficiently, which they accomplish by introducing the fund managers to qualified investors.

The abilities of experienced placement agents, be that as it may, work out positively past simple presentations. Some placement agents offer some benefit added services, for example, getting ready marketing material, formulating a targeting strategy, putting together roadshows, and even haggling for the fund. These services might be particularly valuable for new fund managers.

Placement agents are especially useful for marketing a fund where the fund manager has limited contacts as a presentation from a rumored placement agent improves the credibility of the manager. Alternative wellsprings of capital, like sovereign funds, and [ultra-high net worth individuals](/super high-net-worth-people uhnwi) in many emerging markets and distant around the world feature the useful job of placement agents.

Compensation for Placement Agents

The placement agent is compensated upon the effective placement of the fund with the investor(s) presented by the agent. The agent's compensation, around 2% to 2.5%, is ordinarily a percentage of new money raised for the fund. A few agents remove a portion of their fee in cash and invest the balance in the fund, which adjusts the interests of the agent and fund investors, and furthermore lessens the upfront cash payment by the fund.

Under ordinary conditions, assuming the issuer of the offering terminates the agreement, the placement agent foregoes commissions. Be that as it may, a tail provision qualifies the agent for a commission post-termination in the event that the offering happens inside a certain period, normally short of what one year. This provision must be remembered for the agreement to be substantial.

Special Considerations

Most provisions inside a placement agent agreement can be negotiated between the placement agent and the issuer, with compensation being the most generally negotiated term. Most compensation is paid as commissions on the amount raised; in any case, placement agents can haggle to receive more. For instance, they might consent to likewise receive other consideration, like stock options.

Likewise, issuers at times consent to solely utilize the services of a placement agent; thusly, no other placement agents will be utilized for the subject offering. This arrangement alongside different provisions will be remembered for the placement agent agreement.

Features

• Some placement agents offer different types of assistance, for example, arranging, getting ready marketing material, and creating targeting strategies.
• Placement agents arrange several terms, like compensation and selectiveness, of their agreement.
• A placement agent is a registered agent who interfaces investors with companies offering securities.