Raising money in the capital markets may be more effective with the right support in place. A private placement agent is hired to identify private financing opportunities for clients. Often, these clients are institutional investors such as private equity or real estate firms. A private placement agent could also assist corporations, including start-up businesses looking to raise money for growth or to continue operations. Once investors are identified, a placement agent seeks to gain a financial commitment from them, and if some promise has already been made, the agent may attempt to increase the value of that investment.
Private placements occur throughout the private equity arena. A professional in private equity raises money for an investment portfolio with a specific strategy in mind for the direction of that fund. A private placement agent might be hired to help the firm raise money by locating investors for a particular fund. He or she should have deep industry relationships with institutional investors, including pension funds, endowments, and financial services firms, for instance. Agents should help the private equity managers to establish goals tied to the investment fund so that logical steps can be taken to meet those expectations, such as attempting to close a fund to new investments by a certain date.
To be effective, a private placement agent must be comfortable marketing a client's investment product to other institutional investors. This entails knowing which investment funds would be most appropriate for which investors. Certain investment funds might be most suited for insurance companies, for example, while others might attract investment capital from corporations and wealthy individuals. By matching investment funds with only the most appropriate potential investors, a private placement agent is valuing a client's time by avoiding unproductive conversations. Ideally, a placement agent can return to an investor when a private equity fund is raising a subsequent investment portfolio in the future.
For a private corporation, a placement agent would seek to attract capital from venture capital firms that invest in start-up businesses. An agent might also help a new business to raise mezzanine capital, which could be either debt or equity. The money might be used to fund operations, for expansion, or to strengthen a balance sheet.
The greater the breadth of services that a private placement agent offers, the more business that professional is likely to generate. For instance, a placement agent with experience across continents offers investor clients greater exposure to global capital. A professional who has experience raising money for real estate funds, private equity, and private corporations could benefit most throughout changing economic cycles when asset classes go in and out of favor.