September 11, 2009
Subject : File No. S7-18-09
Lately, professional standards have risen across the spectrum of the private equity industry. Limited partners do far more homework, more thoroughly, than in times past, relying more now on dispassionate analysis than personal chemistry in forming judgments. Being the connecting link between the Limited Partners (LPs) and the General Partners/fund managers, the role played by the Placement Advisors is equally important to both the ends of this buy-sell spectrum :
(1) Limited Partners
As LPs make large scale investment decisions, they look at a wide variety of areas, some of which in areas they have limited exposure to (for instance, emerging markets). Placement Advisors provide sufficient buffer of technical expertise and local market and industry knowledge to help them make optimal allocation of their portfolios
(2) General Partners / Fund Managers
(a) Prior to Fund Launch: Typically, Placement Advisors play an important role in development of the launch strategy. They also chip in with their local market contacts and appropriate technical expertise, both equally vital for any fund manager. Apart from assistance in due diligence efforts as well as preparing presentation materials, their inputs on the structure of the fund and its terms help underpin an effective pre-marketing effort. Overall, they contribute in identifying the right investor base for the fund and help differentiate the fund offering while recognizing the expectations and demands of the prospective investors
(b) During the fundraising : Through our experience, we have noted that Placement Advisors help manage the entire fundraising process and substantially take over the administrative and logistical burden that fundraising usually is. From putting together several meetings and conference calls, detailed road shows, arranging extensive travel for fund's senior management and key persons, the production and delivery of numerous iterations of sophisticated documents and presentations, the organization of large numbers of due diligence visits and calls, coordination of professional services from lawyers, accountants and other consultants and the juggling of multiple simultaneous transactions, their contribution in managing the fundraising challenges is significant
For most GPs / fund managers, the contribution of Placement Advisors has become integral not just during the process of fund-raising but also during the subsequent dialogue between the fund and its LPs