Eaton: SWFs a boon for placement industry
BY: MARINE COLE
Charlie Eaton, founder of Eaton Partners, has seen the fund placement business change dramatically in 30 years. He talks about what the future holds for his firm.
When Charlie Eaton founded placement agency Eaton Partners in 1983 Ronald Reagan and Margaret Thatcher were in power, Mark Zuckerberg hadn’t been born yet and KKR’s buyout of RJR Nabisco was still five years away.
The private equity world was in its infancy and the concept of having a third party help general partners raise funds was nascent.
“There was no industry 30 years ago, mostly for long-only managers. There were hardly any hedge fund or private equity placement agents at that time,” says Eaton, a managing partner at his firm. “There were just a handful of firms trying to raise institutional money.”
The private equity world has changed dramatically since then, with thousands of fund managers, limited partners and service providers transforming the fund placement business. “Now it has become an institutionalised and professionalised business, not only for asset managers but for placement agents as well.”
The importance of LPs like sovereign wealth funds and family offices has expanded in recent years, with many more of them relying on placement agents to access smaller funds, particularly those in the lower mid-market – a sweet spot for investors seeking above-average returns. This has changed the way Eaton does business in the complex and crowded space.
For any given fund the firm helps raise, Eaton Partners has to contact, on average, 200 to 300 institutions. That fund will meet with about half of them, and out of that group, the GP will hopefully end up with roughly 20 investors in a fund of anywhere from $500 million up to several billion. “That’s a big change,” he says. “Thirty years ago, there were maybe 25 to 50 large institutions, mostly public or private pension funds.”
Meanwhile, to secure a single commitment, Eaton Partners has calculated there are now 25 to 27 different points of contact that could range from in-person meetings and phone calls to emails and fund materials being sent by post.
“There are many competitive funds in the market and so it takes a lot of work and effort to secure each commitment,” he says.
Last year, Eaton Partners went through a significant change of its own when mid-market investment bank Stifel Financial acquired the firm, a move partly aimed at spurring growth in new areas. The firm hired two professionals to focus on secondaries two years ago and plans to further expand that business with the help of its new owner.
Eaton Partners is also hoping Stifel will help it grow its footprint. The firm has already opened an office in Chicago since the acquisition closed in January and plans to beef up its European operations are underway. Eaton Partners also wants to expand its client base, reaching out to new LPs including high net worth individuals and family offices.
Despite the acquisition, Eaton has no plans to retire any time soon. “I still love the business,” he says. “I take great pride in the way we’ve helped a lot of people get in this money management business.”
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