LPs have difficulty distinguishing genuine full-service placement agents from so-called “finders”, such as those at the centre of the ongoing US scandal, according to research conducted by PEI Media. The majority of LPs – 55 percent – believe the definition of the two to be “blurred”.
The study features in the latest edition of The Guide to Fund Placement Specialists, published by PEI Media, and canvassed the opinions of 105 LPs and 94 GPs globally in May this year. It comes at a time when the placement agency industry has been thrown into the spotlight by questionable practices uncovered in the US.
New York Attorney General Andrew Cuomo is currently conducting a wide-ranging investigation into a pay-to-play scandal – whereby finders or introducers demand sham “placement” fees in order to secure commitments from LPs – that originated out of the $109 billion New York State Common Retirement Fund.
As lawmakers and other bodies consider the necessity for more stringent regulation of placement agents, almost half of LPs surveyed – 49 percent – feel that they are already sufficiently regulated. Nevertheless, 33 percent are currently considering the need for code of conduct for the placement agents and 17 percent either have a code in place or are currently working on one.
Last week the European Private Equity and Venture Capital Association (EVCA) launched a draft code of conduct for placement agents. The code, which is due to be fully adopted later this year, gives guidelines for placement agents, which, among other things, eliminate the possibility of pay-to-play.
The research also revealed that Credit Suisse is the most highly regarded placement agent worldwide by both the LPs and GPs who responded to PEI’s survey. The investment bank’s private funds group recently advised Oak Hill Capital Partners on raising its $3.8 billion third fund and Pomona Capital on its $1.3 billion seventh fund.
London- and New York-based MVision, an independent placement agency, was ranked as second favourite.