Considerations around Placement Agents

Abstract

The trend toward increasing amounts of capital being allocated to alternatives in the public sector is likely to continue, and placement agents will play a role in this process. Public scrutiny around cases of pay-to-play scandals has created heightened, and justifiable, concern surrounding the investment hiring process. However, inappropriate influences in this process are not a purely exogenous risk. That is, risk is not solely centered on the actions of the external sales agents soliciting the state’s business; rather, it is intrinsic to the decision-making process of staff and trustees. In short, the real risk lies not with placement agents, but with the people entrusted to make the correct decisions on behalf of the beneficiaries for whom they serve as a fiduciary.

TOPICS: Private equity, manager selection, portfolio construction, legal/regulatory/public policy