What is a 'Placement Agent'

A placement agent is an intermediary who raises capital for investment funds. A placement agent can range in size from a one-person independent firm to a large division of a global investment bank. Professional placement agents are required to be registered with the securities regulatory agency in their jurisdiction, such as the U.S. Securities and Exchange Commission. A placement agent operating in the U.S. must be registered as a broker or dealer.

BREAKING DOWN 'Placement Agent'

A placement agent serves a vital function in the fundraising market. Placement agents are hired by investment funds, whether a private equity fund, hedge fund, real estate fund or other alternative assets, to raise capital quickly and efficiently, which they achieve by introducing the fund managers to qualified investors.

The capabilities of experienced placement agents, however, go well beyond mere introductions. Some placement agents provide value-added services such as preparing marketing material, formulating a targeting strategy, organizing road shows, and even negotiating on behalf of the fund. These services may be particularly useful for new fund managers.

Placement agents are especially helpful for marketing a fund in places where the fund manager has limited contacts, as an introduction from a reputed placement agent enhances the credibility of the manager. Alternative sources of capital such as sovereign funds and ultra high net worth individuals in many emerging markets and far-flung areas around the world highlight the productive role of placement agents.

Compensation for Placement Agents

The placement agent is compensated upon successful placement of the fund with the investor(s) introduced by the agent. The agent's compensation is typically a percentage of new money raised for the fund, around 2% to 2.5%. Some agents take part of their fee in cash and invest the balance in the fund, which aligns the interests of the agent and fund investors, and also reduces the upfront cash payment by the fund.

  1. Agent

    An agent is any person who has been legally empowered to act ...
  2. Real Estate Agent

    A real estate agent is a licensed professional who represents ...
  3. Captive Agent

    A captive agent is an insurance agent who only works for one ...
  4. Independent Agent

    An independent agent is an insurance agent that sells insurance ...
  5. Shareholder Services Agent

    A shareholder services agent is a third party that partners with ...
  6. Paying Agent

    A paying agent is an agent who accepts payments from the issuer ...
Related Articles
  1. Financial Advisor

    How to Find the Best Life Insurance Agent

    Choosing a life insurance agent is the first and most important step in obtaining coverage. Buyers should pay attention to five key factors.
  2. Investing

    How Real Estate Agent and Broker Fees Work

    Buying or selling a home? What you need to know about real estate agent and broker fees.
  3. Investing

    Do You Need A Real Estate Agent?

    There's no guarantee that realtors will act in your best interest, but it may be worth hiring one anyway.
  4. Financial Advisor

    A Day In The Life Of A Real Estate Agent

    While every day is unique for a real estate agent, there are some activities that may be a typical part of an agent's day.
  5. Investing

    Top 5 Signs Of A Bad Real Estate Agent

    The signs of a bad agent go beyond whether your home sells quickly.
  6. Investing

    Understanding Real Estate Commissions: Who Pays?

    When you set out to buy or sell a house, one factor worth considering is the real estate agent's fees.
  7. Investing

    How Do Real Estate Agents Get Paid?

    Most real estate agents are paid a commission based on the sale price of a property and split between the agents and brokers involved.
  8. Insurance

    8 Qualities That Make A Good Insurance Agent

    Insurance agents must possess each of the following qualities in order to be successful.
  9. Investing

    5 Reasons Why You Still Need A Real Estate Agent

    Doing the work yourself can save money, but it could end up being more costly than a realtor’s commission in the long run.
  10. Insurance

    What Your Life Insurance Agent Makes – On You

    Being paid by commission gives life insurance agents an incentive to sell bigger policies and specialized financial products. Remember that before you buy.
  1. How does private placement affect share price?

    Understand what it means when a company does a private placement, and find out how this typically impacts the share price ... Read Answer >>
  2. How can I tell when a real estate agent might be lying to me?

    Find out what real estate agents are likely to lie about, the reasons for the lies and how to protect yourself from unscrupulous ... Read Answer >>
  3. How much money do real estate agents make?

    Learn about the salaries of top earners in the real estate industry and how factors, such as location, can raise or lower ... Read Answer >>
  4. What is required to become an accredited investor in a private placement?

    Learn how the SEC defines accredited investors, and understand exceptions to the requirements for an accredited investor ... Read Answer >>
Hot Definitions
  1. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  2. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  3. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  4. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
  5. Leverage Ratio

    A leverage ratio is any one of several financial measurements that look at how much capital comes in the form of debt, or ...
  6. Annuity

    An annuity is a financial product that pays out a fixed stream of payments to an individual, primarily used as an income ...
Trading Center