In the wake of the pay-to-play allegations now scandalising the US public pension market, proposals began surfacing to ban the use of placement agents in raising capital from these institutions. Kevin Albert says that initially he thought this idea was “so ridiculous that it would go away”.
But the idea of banning placement agents from public pensions has only gained momentum, with the SEC now seriously considering a nationwide rule to this effect. Albert, a managing director at private equity firm Elevation Partners in charge of investor relations, says he staunchly disagrees with the ban, but believes it is inevitable especially given the political firestorm surrounding a new CalPERs pay-to-play investigation.
Albert is one of the most credentialed investor relations professionals working today – as the former global head of equity placement for Merrill Lynch, he essentially created the business of placing private equity funds some 20 years ago. The placement industry reached its zenith in 2007 at the height of the private equity fundraising boom. “I didn't even recognise half the names of all these boutiques” that sprang up to help GPs raise capital, says Albert.
Albert says a ban on agent-pension contact would have a profound impact on the industry. “If you lose the public pension business, you'll have to take 25 to 30 percent out of the business,” he says. “And remember, the big orders always come from the public pension funds. Those are easier than raising capital in 20 littler orders.”
He estimates that there are probably 40 percent fewer people today with the job description “placement agent” than there were in 2007. Many may end up within private investment firms. In fact, the future of the IR function may look much more like Elevation Partners, with its internal fundraising capability. Albert notes, however, that having a team in-house is a luxury that many smaller firms can't afford.