For investment managers, capital raising can be a major challenge. It takes a tremendous amount of time, effort and expertise to manage the fundraising process. Some managers have entire departments focused on the function of capital raising, while others look to outside providers like placement agents and third-party marketers for help.
What are placement agents and third-party marketers?
The terms placement agent and third-party marketer are often used interchangeably because they essentially provide the same service of helping their investment manager clients to raise capital. However, there is a slight difference which is based on their clientele. Placement agents generally work with alternative investment managers such as those managing private equity, hedge funds, and private real estate funds, while third-party marketers work with more traditional institutional and retail-oriented managers such as those managing mutual funds and institutional portfolios.
Both placement agents and third-party marketers leverage their extensive networks and deep understanding of the market to facilitate fundraising efforts.
While they are often perceived as mere introductory services, their functionalities often extend far beyond this.
This may include finding investors (limited partners, LPs), developing marketing materials, preparing necessary documentation, setting up data rooms, managing crucial relationships, coordinating meetings, and assisting LPs right up to the fund’s final close.
Compensation for Placement Agents and Third Party Marketers
Placement Agents and third party marketers may charge an up-front retainer, but the bulk of their compensation typically will come upon successfully completing a capital raise, either as a percentage of management fees (often ranging between 5-40%) or a percentage of total capital raised (often around 2-5%). They may also require exclusivity from the clients.
Relationships: the name of the game
The most important asset that a placement agent or third party marketer can bring to an investment manager is a strong, relevant LP network. By relevant, we mean that their network should have investors that would be interested in their client’s fund or offering.
Placement agents and third party marketers will often specialize. For example, some placement agents or third party marketers might be better connected with endowments, while another with family offices. They’ll need to know which LPs are interested in which strategies, for example, knowing which LPs are interested in long/short vs real estate or any other strategy.
How to find a good placement agent or third party marketer
There are thousands of placement agents and third party marketers. Finding the best fit is imperative.
Look for a solid track record: What successful raises have they completed? Try to speak with their previous clients about their experience working with them.
Check their specialization: Which investors are they well connected with? Which strategies are their networks focused on?
Look at their process: How are they leveraging technology? Are they a digital-forward firm or are they using more traditional methods? Who makes the phone calls to investors? Is it a senior partner or some junior associate?
Leveraging technology and solid marketing fundamentals
Placement agents and third party marketers are great at building and leveraging relationships. But there are many things that their clients require which are not quite their specialty, such a web development and sophisticated digital marketing strategies with actionable data analytics. By equipping themselves with a strong digital strategy, placement agents and third party marketers can be much more effective.
Lead Nectar helps placement agents and third party marketers with:
- Developing target investor lists
- Crafting of messaging and telling of the story
- Building customized pitch books
- Developing great websites
- Managing LinkedIn content creation
- Implementing multi-channel communication strategies – going beyond email blasts to create sophisticated, multi-channel communication campaigns to generate inbound leads
- Public relations to build credibility and attract prospective investors
