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Intermediation in Private Equity: The Role of Placement Agents

  • Matthew D. Cain, Stephen B. McKeon and Steven Davidoff Solomon


Intermediation in private equity involves illiquid investments, professional investors, and high information asymmetry. We use this unique setting to empirically evaluate theoretical predictions regarding intermediation. Using placement agents has become nearly ubiquitous, but agents are associated with significantly lower abnormal returns in venture and real estate funds, consistent with investor capture and influence peddling. However, returns are higher for buyout funds employing a top-tier agent and for first-time real estate and venture funds employing an agent, and are less volatile for agent-affiliated funds, consistent with a certification role. Our results suggest heterogeneous motives for intermediation in the private equity industry.


Corresponding author

*Cain (corresponding author),, University of California Berkeley Center for Law and Business; McKeon,, University of Oregon Lundquist College of Business; and Solomon,, University of California Berkeley School of Law.


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The authors thank an anonymous referee, Jean-Noël Barrot, John Chalmers, Diane Del Guercio, Ro Gutierrez, Yael Hochberg, Paul Malatesta (the editor), Youchang Wu, and conference and seminar participants at the 2015 American Finance Association Annual Meeting, 2015 Private Equity Research Consortium (PERC) Meeting, 2014 Argentum Centre for Private Equity Symposium, 2014 American Law and Economics Association Annual Meeting, 2015 Conference to honor John McConnell’s contributions in the field of finance, The Brattle Group, Indiana University, the U.S. Securities and Exchange Commission, the University of Notre Dame, and the University of Oregon for helpful comments. They also thank James Hicks for his research assistance.



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Intermediation in Private Equity: The Role of Placement Agents

  • Matthew D. Cain, Stephen B. McKeon and Steven Davidoff Solomon


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