Preqin is today announcing the launch of a new research report undertaken in order to assess the potential impact of the proposed changes to the private equity industry that would be brought about by the introduction of SEC proposed rule release IA-2910 relating to the introduction of Advisers Act Rule 206(4)-5. This report can be viewed on the SEC website at the following address:
http://sec.gov/rules/proposed/2009/ia-2910.pdf
We were interested in gauging reaction to the proposals to ban political contributions by investment advisors (i.e. private equity and other fund managers) and also the blanket banning of the use of placement agents (third-party marketing) in soliciting commitments from public pension plans and other public investors in the US. We therefore surveyed 50 leading US institutional investors on a variety of topics relating to the proposals.
Key findings include:- 83% of those aware of the proposals were in favour of bringing in restrictions on advisors making political contributions
- 70% of those aware of the proposals were against banning the use of third-party marketing professionals (placement agents)
- 50% of public investors (pension plans and government agencies) have invested with funds after being approached by a placement agent representing a fund
- 77% of respondents see placement agents as very important for smaller firms
- 15% of respondents see placement agents as very important for larger firms
- 70% of respondents see any ban on placement agents benefiting larger firms with 0% of respondents seeing a benefit for smaller firms
The full report is available to view here: www.preqin.com/placement
Comment on proposal to ban use of placement agents:
“At Preqin, we are in constant communication with professionals in all different areas of the private equity industry. Following the announcement of these new proposals we have heard concerns voiced not just from the placement agents and fund managers, but also from the institutional investors potentially standing to benefit from the services provided by reputable placement firms. We hope this report will go some way to quantifying the concerns existing amongst the very group that these new proposals are attempting to protect – the institutional investors.
Clearly there is support for the cessation of political contributions, but the blanket ban on the use of placement agents is a draconian solution that will not be welcomed by the vast majority of the private equity industry, and may in fact cause the exact opposite of what the SEC intended, with smaller private equity firms likely to lose out to a much greater degree than the larger firms which will be able to adapt to the new rules by forming in-house fundraising and placement teams.
- Tim Friedman, Head of Communications, Preqin
