Will PE Placement Agents Go the Way of the Rolodex?
July 28th, 2017
When disruptive technology builds a solid foothold in an industry, change accelerates. Today, Palico’s digital marketplace for private equity fundraising, co-investments and secondaries unites over 3,000 limited partners from 1,900 firms with 5,000 GPs, offering investment vehicles in everything from venture capital to buyouts to litigation finance. Using Palico, LPs and GPs from across the world are evaluating private equity opportunities on a daily basis and closing deals with each other weekly.
|The Dust Heap of History|
Does the above mean Palico’s marketplace is in the process of assigning the placement agent, the traditional intermediary for both private equity primaries and secondaries, to the dust heap of history; the same place to which computers – the grandaddy of modern disruptors – largely relegated the rolodex, the putative cousin of the placement agent? The answer is no.
|Digital Marketplaces and Placement Agents Thrive amid Complexity|
It’s no coincidence that the use of placement agents has grown in tandem with Palico’s digital marketplace for private equity funds. Between the fall of 2012, when Palico launched, and today private equity investment has become more complex and the field of funds increasingly crowded. Those factors are putting a new value premium on the services of both digital marketplaces and placement agents. A record 3,039 private equity funds are seeking capital from investors today, 68 percent more than the 1,812 – at the time, a record – that were fundraising when Palico went live. The common thread between these vehicles is a long-term activist approach to the improvement of assets, encompassing an ever broadening range of strategies from credit to buyout. As Palico’s digital marketplace grew over these years to a mainstream option for investment in private equity funds, the use of placement agents also rose. Today, 58 percent of private equity fundraising campaigns employ placement agents, versus 46 percent in 2012.
|PE Marketplaces Refocus Attention on the Placement Agent’s Real Value|
Going forward, placement agents and digital marketplaces will provide critical services for private equity managers and investors. Both add to an LP’s or GP’s resources at a time when choice, be it on a geographic or sector level, is rising to unprecedented levels. Yet online marketplaces like Palico have refocused attention on the placement agent’s real value as a strategic adviser. Good placement agents provide market intelligence and the kind of battle-tested experience needed to craft a perfectly pitched fundraising campaign.
|The Success of Digital Marketplaces Does Mean Extinction for Some|
There is one type of placement agent, however, that has been put on notice by the success of digital marketplaces. As digital marketplaces become the principal means of fund discovery in private equity, placement agents that serve purely as rolodexes are likely to find themselves struggling for relevance and in many cases disappearing.
|Palico Makes PE Accessible and Affordable|
Palico is a disruptor in the classic sense: It’s altering fundraising and secondary sales with a digital approach that makes products more accessible and affordable. It’s making fundraising and secondaries democratic – open to big and small whether investor, manager, gatekeeper, placement agent or secondary advisor.