With the continuing economic crisis, the ability to successfully raise capital has become increasingly important. This has left many GPs facing the probability of reaching final closes short of initial hard-cap targets. There are a number of factors that need to be addressed by fund managers in order to be successful in the current fundraising market. Variables such as fees and terms of engagement proposed by fund managers vary significantly, but can be extremely important factors in the overall success of the fundraising process. A fund manager’s track record and level of experience can also play a crucial role in the fund manager’s ability to secure investment.
The current unlisted infrastructure fundraising market is made up of 146 vehicles targeting an aggregate capital of $90bn. Of these funds, 52% have held at least one interim close raising an aggregate of $20bn in investor capital. Forty-seven percent of funds on the road employ the services of a placement agent, while the remaining 53% raising capital via in-house teams. Interestingly, 75% of vehicles working alongside a placement agent have already reached an interim close, compared to 59% of those funds which are advised in-house. Between 2011 and 2012, 87 unlisted infrastructure funds reached a final close raising an aggregate $53bn. Of these vehicles, 62% employed the services of a placement agent during the fundraising process, raising $27bn. Seventy-one percent of the 29 vehicles abandoned during this period did not utilize placement agents. This data would suggest that funds working alongside a placement agent are more likely to hold an interim close in the current market than those that are not.
Therefore, while experienced fund managers are often less inclined to opt for the services of placement agents, first time fund managers may find that the services offered by a placement agent will assist the fundraising process significantly. As the infrastructure asset class continues to grow in significance it is likely that placement agents will continue to play an important role in infrastructure and private equity fundraising.