Financial services giant Deloitte has confirmed market chatter that it is winding down its private equity fund placement business in light of market conditions.
The move comes as the fund placement landscape undergoes fundamental changes caused by the global slowdown in fundraising as well as potential US regulatory changes. Citi and Merrill Lynch are among other groups to have recently confirmed they will halt or reduce placement activities.
Deloitte’s 10-strong global team is being disbanded due to “an increasingly complex regulatory environment in this area”, according to an emailed statement from the firm, which added: “This was a niche service offering, and we remain fully committed to the private equity sector.”
The placement team, which was established in 2005, had acted for clients such as ECI Partners, Mezzanine Management and Montagu Private Equity.
Probitas Partners, the San Francisco-headquartered placement agent, advisor and secondaries broker, is the first firm to benefit from Deloitte’s exit from the market by hiring two of its top capital raisers.
James Coleman, partner and former head of the Deloitte placement team, has been hired by Probitas as a managing partner and will lead its London-based European office. He is joined by former Deloitte director Vincent le Hodey, who has been hired by Probitas as director.
Global fundraising for private equity vehicles has dropped from a high of more than $500 billion in 2007 to less than $100 billion in 2009 to date, according to sister data provider Private Equity Connect. Greg Hausler, a founding partner at Probitas, described the current market as being “as tough as it has ever been for capital raising and executing secondary mandates” in a statement this morning.
As well as the declining fundraising market, the industry has been hit by the allegedly unscrupulous activity of certain “finders” – agents who facilitate introductions for GPs with potential LPs, but are not licensed placement agents – in the US.
This has brought the placement industry as a whole to the attention of the lawmakers. New York Attorney General Andrew Cuomo is currently conducting a wide-ranging investigation into a pay-to-play scandal – whereby finders or introducers demand sham “placement” fees in order to secure commitments from LPs – that originated out of the $109 billion New York State Common Retirement Fund. Cuomo is asking some firms to agree to codes of conduct that prohibit the use of placement agents, while The Securities and Exchange Commission has proposed regulatory changes that, among other things, would prohibit public US pensions from interacting with placement agents and other third parties.
In related news, earlier this week PEO reported that CP Eaton, a fund placement specialist, had lost two of its senior European capital raisers: Anne Gales and Alex Walker.