What is a placement agent?

Agents are engaged under a written mandate, often with exclusivity and a tail period that keeps the fee payable on investors introduced during the engagement. Fees are typically paid by the management company, sometimes with an offset against the management fee. Agents are often confused with finders, and in the U.S. must be registered broker-dealers.

Say a manager hires a placement agent for a $1 billion fund. If the agent brings in $300 million at a 1% fee, it earns $3 million.

Agents open doors for new managers, and their fees and conflicts are a recurring question for public pension investors.