Placement Agents: A Resource for Hedge Funds & Private Equity Firms

Alpha Advantage Capital is a placement agent firm, or third party marketer, based in Tampa. The firm has global relationships and leverages them in order to help clients meet and exceed their funding goals. The firm, which is diligently working to earn Tampa financial hub status, wants to elevate general understanding about why hedge funds and private equity firms use placement agents. To support that understanding, here’s a list because lists are great ways to tackle complex topics.

Listing the Benefits

• Time: People managing hedge funds and private equity firms are busy. A 24/7 Netflix and chill approach doesn’t pave the path to helm loads of money. As such, placement agents add value to both hedge funds and private equity firms because they can be tasked with doing things for which there would otherwise be no time. For example, a placement agent might be able to support a hedge fund manager and his/her internal team in establishing relationships with investor types that, due to the insufficient resource of time, they could not meet on their own. A private equity firm strapped for time may find it beneficial to give the placement agent the lead on drafting and distributing a document like the private placement memorandum, which is utilized to relay key information (e.g. investing risks) about a company to potential investors. The time placement agents can help both hedge funds and private equity firms recoup is often reason enough to bring a placement agent on board.
• Extending reach: It follows that placement agents are brought on board to help hedge funds and private equity firms extend their reach. Placement agents are known for their extensive contacts. Through placement agents’ investor contacts, hedge funds and private equity firms up their chances of gaining access to industries, and both accredited and qualified investors, with which they would have remained on the periphery. Of course, while the lengthy contact lists placement agents offer are essential, agents must have the expertise to successfully market hedge funds and private equity firms to potential investors. Who the placement agent knows matters a great deal toward raising capital. What the placement agent knows is also significant, as both hedge funds and private equity firms entail a healthy amount of risk.
• Marketing: As intermediaries, placement agents are successful in raising capital through strategic, well-crafted marketing. Placement agents might be tasked with developing marketing materials and methodically disseminating them. Placement agents must be adept storytellers; specifically, they must know how to tell a hedge fund’s story in ways that particular investor types will find meaningful. Working with a private equity firm, placement agents must know the intricacies and nuances of the companies they’re attempting to have a particular private equity firm invest in—that’s more complex than reading a company’s mission statement on the Internet. Marketing hedge funds and private equity calls for placement agents to articulate relevant stories, with investment benefits as the climax, in light of specific investors’ evaluation criteria.
• Institutional capital: There are a number of barriers to gaining access to institutional capital. Namely, time and inadequate knowledge about specific kinds of institutional capital and their corresponding investment guidelines. Hedge fund and private equity firm managers might choose a certain placement agent because of the agent’s expertise in securing capital from state pension plans, for example. Placement agents’ relationships with and knowledge about institutional capital can help managers exceed funding goals in ways that would not otherwise be possible.

In the end, placement agents, like Alpha Advantage Capital, are beneficial for hedge funds and private equity firms because they offer time, established contacts, marketing, and access to institutional capital. Placement agents’ marketing skills make them more than a Rolodex. Given the cost structure of working with a placement agent, and the capital the agent will potentially secure, it’s a financially sound choice to work with a firm like Alpha Advantage Capital.

Categorized in: Work

This post was written by Elevate, Inc.