A majority of U.S. institutional private equity investors surveyed by alternative investment research firm Preqin oppose an SEC ban on the use of placement agents, although most largely support the SEC's efforts to restrict political contributions from money managers.
The survey of 50 leading U.S.-based institutional investors shows 70% opposing a ban on placement agents and 83% supporting restricted political contributions.
Seventy-seven percent of respondents said placement agents are more important for smaller private equity firms, with 15% saying they're more important for larger private equity firms.
Some 70% said the ban would benefit larger firms; no one said it would benefit smaller firms.
“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,” according to the survey.
The SEC has proposed banning the use of placement agents, pension consultants and other third parties in soliciting investments from public pension funds. Another SEC proposal would bar money management executives and employees who make political contributions of $250 or more to officials involved in investment manager selection for a public plan from providing services to that plan for a period of two years.
The full Preqin report is available at http://www.preqin.com/placement.