Private Markets Without a Guide: How Individual Investors Can Learn to Navigate Them

As the “democratization” of private markets accelerates, it raises an important question: who is helping new entrants navigate this complex market?

A report by Deloitte estimates that U.S. retail investors will increase their exposure to private assets from about $0.1 trillion in 2024 to $2.4 trillion in 2030. In the E.U., invested capital is expected to triple from about $1 trillion to $3.3 trillion over the same period.

As investors gain greater access, however, they will not have the benefit of placement agents who have long been critical resources for institutional investors. Despite the sophistication of private fund managers and institutional investors, placement agents still play an important role for each.

Placement agents are intermediaries who facilitate the sale of limited partnership interests to investors. They perform many services for fund managers, including preparing marketing materials, soliciting potential investors, managing the due diligence process, and helping to negotiate fund terms. A critical aspect of their role is that they are a source of market intelligence for both managers and investors.

In this article, we examine academic and industry research on how placement agents create value, share our professional experiences from both sides of the table, and conclude with practical ways that individual investors can replicate the advantages institutional investors have long relied on.

Placement Agents’ Role in Private Markets

There has been limited research on the role of placement agents in the private fund ecosystem, though it represents a substantial segment of the industry. As of mid-2025, Preqin tracks over 2,400 placement agents, and about 30% of funds raised yearly use one. According to Preqin’s latest data, funds that use placement agents achieve superior fundraising outcomes, with established managers raising more than their target 48% of the time compared to 23% for those not using agents. For first-time managers, the difference is narrower – 33% versus 29%.

While their value to general partners is clear, the benefits to limited partners have been studied less extensively. A 2020 Journal of Financial and Quantitative Analysis paper analyzed over 30,000 commitments to 4,000 private funds raised between 1991 and 2006. Twenty percent used placement agents. The paper provides insight into whether placement agents are a valuable resource for investors. The authors found that agents they categorized as “more reputable” – those with extensive experience – were associated with funds that had higher returns and lower volatility. However, investors who consistently bought from the same agent experienced weaker returns, suggesting that overreliance on relationships can erode discipline.

While the data points to placement agents playing a significant role for both general partners and limited partners, our professional experiences shed more light on how they improve capital allocation within the industry.  

A Deeper Dive

Patrick: In your prior life as an institutional investor, how did you differentiate between funds presented by a placement agent and those you sourced directly? Did the presence of an agent change your perception of fund quality?

Steve: My goal was always to widen the investment funnel and review as many credible fund opportunities as possible. Placement agents often brought forward first-time managers or firms without deep relationships in the insurance industry. The fact that a fund was represented by an agent didn’t influence my initial view. But if the agent had real sector expertise and a disciplined diligence process and understood our investment priorities, I would give that fund a higher priority to review. Ultimately, every investment decision rested on our independent assessment of the manager’s capabilities and potential to outperform.

Steve: As a placement agent, what do you look for in general partners that you represent? 

Patrick: A lot of what we’re looking for is very similar to what LP investors are seeking – market opportunity, the integrity of the manager, experience and track record, replicability of the strategy, and how returns are being generated. There’s also a compliance and data security component that has become increasingly important.

Our business focuses on specialty managers – those with niche expertise and pricing power who can pass on that margin to investors. Much of our underwriting centers on how they perform in challenging markets or react when investments go sideways. We want to know how they respond to adversity. Or, if they are in a niche market, do they have the self-control to be more defensive when that part of the market gets toppy, or are they the frog in the frying pan?

All this culminates in “Would I invest in this?” – which is important because I invest personally with most of our clients.

That’s the underwriting part. The next part is very different than an LP analysis: “How do we sell it?” It could be a great idea and a solid manager, but we need to find the right investors. Some products target specific constituencies – for example, right now we have a product designed for insurance company investors sensitive to risk-based capital requirements. But most of what we do is market to a mix of investor types, and for those funds, we focus on helping GPs clearly articulate their strategy in a way that’s compelling to investors. 

Patrick: Since you worked for a large institution with a large staff and resources, where did you see placement agents as most effective in your investment process?

Steve: Their guidance often preceded specific fund offerings. As we developed our overall investment strategy, we listened carefully to many sources – general partners, other LPs, industry contacts, and placement agents – to identify long-term opportunities. Placement agents provided market intelligence about new strategies and sectors we didn’t always get elsewhere. Through discussions, we identified portfolio gaps and sought fund managers in those areas.

Patrick: Digging deeper, how do placement agents add value to investors during the diligence process? Are there examples of you going into a meeting with a fixed idea on an investment, and you changed your mind? How did that happen?

Steve: Placement agents add value in several ways, but I will mention three. First, they understand a GP’s competitive set and can position the manager’s strengths objectively. Second, they help managers respond clearly to investor questions, avoiding miscommunication that can derail short introductory meetings. Finally, they create space for candid feedback, allowing investors and managers to engage openly.

After discussions that revealed a GP’s true edge, I have changed my mind on many funds. Institutional investors are presented with many funds every week, and they need to decline most due to time and capital constraints. Some funds are obvious rejections, while others are almost immediate “yeses,” particularly those raised by managers you have known for a long time. The ones in between require listening carefully to how the GP articulates their strategy and competitive edge. Meetings with managers help you better distinguish the potential “yeses” from the “no’s” and focus your due diligence to confirm your impressions.

Steve: As I noted, placement agents are vital sources of market intelligence. How do you view your role when speaking with investors about the market, sharing information, and learning from them?

Patrick: Investors like you say market intelligence; I say education! It’s essential. I recall when we first worked together on a corporate mezzanine fund in 2003, Steve – a big part of the market didn’t know what mezzanine debt was. There were only a handful of comps. So I spent a good amount of time on the phone explaining the security and why it played an essential role for middle-market private equity managers who couldn’t access the public high-yield market then. 

If the manager competes in a broad market, we must show investors how our client has a competitive advantage in this ecosystem. If it’s a niche manager, we explore sector dynamics. The clients I have had the most success with recognize the importance of education and keep me informed about their markets.  Most private markets are inefficient – that’s what makes them interesting! Investors need information to make good decisions. The best sponsors understand this and educate me so that I can pass on this knowledge.

Steve: Is getting the right investors for a manager’s fund important, and how do placement agents do that? 

Patrick: Ideal investors understand your business and continue to re-up in subsequent funds as long as the sponsor performs. Having said that, I see two types of investors: “allocators,” who seek long-term relationships, and “opportunistic” investors, who focus on single transactions.

Many of the managers we represent are raising one of their first funds (Funds I–III), and we need both of these constituencies to help our clients build their franchise. The opportunistic investors tend to be more open-minded, especially if the strategy is specialized. The allocators tend to want or need to put you into a specific category. Their underwriting can be extensive, but they are very loyal once you are in their ecosystem and performing as expected.

Steve: How do you see the role of placement agents changing in the future?

Patrick: For the larger funds, the template has been established to supplement their internal sales and marketing teams with placement agents who have better access to a geographic region, a specific category of investors, or product knowledge. I think that will continue.

For smaller, boutique firms like ourselves, our experience is twofold. Some assignments are targeted and limited because the product is designed for a specific subset of the market. For broader campaigns, we want to be as closely aligned with the sponsor as possible to communicate with the market effectively and help grow the franchise significantly. One client once referred to us in a meeting as their “marketing partner,” which summarizes the role we like to play and where we are most effective. 

Steve: We’ve been in a generally strong economy for many years, and it’s easy to overlook the value that placement agents bring in that environment. With some of the performance and fundraising challenges that segments of private markets have faced recently, however, I think investors have become more focused on identifying which managers’ strategies can deliver strong returns even in a downturn. This is when trusted advisors can add real value by helping managers with sustainable competitive advantages connect with the right investors. 

Patrick: You raise a good point, Steve. It’s been a long run in this market and, in my experience, when private markets turn, there’s always a period of turmoil where many established firms lose market share and new ones emerge to take their place. For example, the real estate private fund market reinvented itself after the GFC. Whenever these shifts occur, new managers become the bread and butter for all good placement agents.

From Institutions to Individuals

The institutional experience shows that success in private markets depends on access to expertise, disciplined diligence, and quality information – all areas where placement agents have historically added value. As individual investors enter this market, they can borrow these same principles by building their own versions of that guidance network.

Practical Recommendations for Individual Investors

Over decades, the private markets ecosystem has evolved into a substantial industry dominated by large, sophisticated fund managers and investors. Placement agents and other consultants have played an essential role in helping them sort through an ever-increasing range of options.

Individual investors now find themselves in the early stages of a similar growth trajectory, but often lack the staff and resources institutions have to make their investment decisions. The following steps can help replicate, in part, the advantages that placement agents and consultants bring to institutional programs.

1. Build a Relationship with a Private Wealth Manager

Sophisticated wealth management platforms, including some online platforms, can provide placement agent-like functions for high-net-worth clients. The key is finding advisors with deep private market experience, not just product access. Investors should ask:

• How many funds did the firm offer in the past year, and how much capital did they raise?
• What is the firm’s selection process, and what elements do they consider most important?
• How does the firm identify and manage conflicts related to the funds it offers?
• Does the firm maintain direct relationships with fund managers, and can they get responses to retail investor questions?
• Does the firm host webinars or other informational sessions with fund managers?
• What type of reporting does the firm provide investors, and are there opportunities to examine the funds’ performance in more depth?

Accessing private funds through wealth managers can be expensive, but they can deliver institutional-quality manager selection and broad market information. They also provide valuable educational content.

2. Build Institutional-Grade Knowledge

Individual investors today have access to professional-level education on private markets. In addition to engaging with private wealth managers, they can tap into a growing system of structured learning and market intelligence.

• Professional associations such as the CFA Institute and the Institutional Limited Partners Association offer courses to deepen understanding of private market strategies and governance.
• The Chartered Alternative Investment Analyst Association (CAIA) also provides programs and analysis from industry leaders.
• Industry platforms like Preqin and PitchBook deliver valuable data and insights often geared to institutional investors, while firms such as iCapital, CAIS, and Moonfare curate educational content specifically aimed at individual investors. 

Collectively, these resources provide an enormous repository of information to help guide investors. However, the volume of information available can easily overwhelm even experienced investors. Investors should start by learning the industry’s foundational concepts before delving too deeply into the latest strategies or funds they read about in the industry press. 

The Path Forward for Retail Investors

The democratization of private markets is often framed as a story about creating greater access. Despite the significant risks of investing in private assets, many retail investors will enter this market without the trusted guidance that has long shaped institutional investing. Advisors, consultants, and placement agents have historically helped investors stay informed as opportunities and challenges evolve. Without proper guidance, a retail investor might be swayed by marketing without fully understanding a fund’s strategy, the quality of the manager, and product features (such as liquidity constraints).

To succeed, individual investors must build their intelligence networks – through experienced wealth managers, peer communities, and professional education – before committing capital. Access is only the first step; success depends on developing the knowledge and expertise to navigate an increasingly complex investment landscape.