In Defense of Placement Agents: "We Aren't Unlike Bankers Doing IPOs"
Today New York State Comptroller DiNapoli announced a ban on the involvement of placement agents in any investment by the New York State Common Retirement Fund. That's on the heels of Carlyle Group, and possibly other firms, completely dropping its use of the service. Clearly, these actions make life more difficult for the numerous professionals who make a living placing funds. To get a placement agent's perspective, I spoke with Russell P. Pennoyer, president of Benedetto, Gartland & Company. His firm, based in New York, is one of the earliest placement boutiques, founded in 1988. He discussed what value placement agents bring to funds in the market, and what should be done to make the process less prone to corruption. Is the placement agent business really just a matter of selling connections? What value do you bring to clients? The vast majority of people in this business are like any other investment banker helping a client access the capital markets. The GPs, who are extremely skilled in the types of investing they do, don't really know how to do all of the work that goes into raising a fund. They don't necessarily know how to describe what they do. They don't necessarily know what an investor needs to see to make an informed decision, or what kind of background information they want.
