Independent Brokerage Solutions leads placement agents in number of fund closes

Independent Brokerage Solutions LLC participated in 17 private fund closes between Jan. 1 and Dec. 15, making the New York-based investment banking firm the most active placement agent in 2022 so far, according to data from Preqin Pro.

With just two weeks remaining in the year, Independent Brokerage Solutions was well ahead of some better-known placement agents in the end-of-year rankings, at least by one measure. But with an aggregate final close size of just $130 million, according to Preqin, it trails well behind some of the industry's top performers in 2022 when the value of those funds is considered.

Latin America-focused Picton SA was a placement agent on just four funds that closed between Jan. 1 and Dec. 15 but recorded an aggregate fund close value of $56.3 billion, leading all other placement agents over that period.

The top placement agent in 2021, Evercore Inc., raised capital for 14 funds that closed in 2022, three fewer than in 2021 but enough for second place on Preqin's top 100 list. The aggregate final close size was $25.94 billion, down about 6.7% from the $27.8 billion total for Evercore this time a year ago.

Fundraising challenges

Coming off a record year for investor commitments to private equity in 2021, placement agents faced a more challenging fundraising environment in 2022, said Bart Molloy, a partner at Monument Group.

Private equity fund managers set ambitious fundraising targets at the year's outset, and the accelerating private equity fund cycle ramped up the pressure on institutional investors. Many of those same investors, including public pension funds and college endowments, were squeezed even tighter when stock markets turned down early in the year, erasing a portion of the value of their public market investments and leaving them overweight in private market holdings.

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Molloy said institutional investors were feeling capital-constrained at a time when the economic outlook was growing much more uncertain, fueling a flight-to-quality trend. Investors favored the best-known private equity fund managers and those with whom they had preexisting relationships when it came time to commit their limited capital.

The upside for investors was that the fundraising power dynamic shifted in their favor.

"The demand for fundraising is higher than the supply of new capital, so that [limited partners] can really be strategic about where they focus on their opportunities," Molloy said.

Outlook for 2023

While private equity investors are grappling with the uncertain outlook, they also understand that times of economic upheaval can produce some of the industry's best-performing fund vintages, Molloy said. And they are taking steps to free up more capital for investment in 2023.

"I wouldn't say that's across the board, but it's meaningful enough if it's 25% of the folks we talk to saying they'll have a little bit more room next year," Molloy said.

Investors who have earned strong returns from technology-focused private equity funds and growth equity investments in recent years are now diversifying by adding "some different all-weather-type strategies" to their portfolios, Molloy said.

"I think people are looking at it tactically as what makes sense, not just with the rearview look but how are things going to be most well-positioned for a potentially volatile next couple of years," Molloy said.