So we have been in the process of raising a new fund. We have spoken to a few placement agents to leverage their relationships and help raise some additional equity. The fees that we have been seeing seem like robbery wanting 20% of fee income for the first two years and a carried interest on top of retainers and traveling costs.
For those of you that have used these guys to help raise funds what kind of fee structures have you seen?
I’ve previously done placement agent work at various capital markets firms for a combined seven years or so.
The success fee structure you quoted actually seems light. The rule of thumb is that the fee approximates one year of asset management fees, plus expenses with a cap (for travel, printing, etc.). I haven’t seen any large, institutional shops accept fund carry, but have seen that for smaller, one-man, fly-by-night “placement agent” practices that target smaller, upstart managers.
For deals I’ve worked on, the success fee fluctuates around 2% (1% for larger fundraisers with high quality managers that need project management support / 3% for smaller funds, or ones with quick timelines or unique challenges).
Retainers can be good or bad depending on the agent. I like having a small retainer because they keep everyone honest and accountable throughout the process. In any case, it is usually credited against the success fee if any capital is placed.
Happy to speak if you PM me
Any capital markets team who can even offer that as compensation is a red flag. All the legit shops are forbidden to do so - conflict of interest/corporate doesn't get their true nut.
We typically charge a % of equity requirement - but have heard of others structuring similar to what you've laid out. Depends on the sponsor - the better the sponsor the less we're charging.
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