In July 2019, private equity firm Platinum Equity reported using two placement agents, VolcomCapital SA and Magenta Capital Services Ltd., to raise capital from non-US investors for Platinum Equity Capital Partners V.[i]
VolcomCapital was founded by Sebastián Piñera Morel, son of Chilean President Sebastián Piñera.[ii]
Magenta Capital Services Ltd, which is registered in the British Virgin Islands, is run by Mohammed Afkhami and raises capital in the Gulf Region, Brunei and Malaysia.[iii]
In a 2020 fee report to the Fresno County (CA) Employees Retirement System, Platinum Equity reported charging the pension fund a pro-rata share ($12,180) of the $11.8 million in placement fees paid to help raise Platinum Equity Capital Partners V.
Based on average placement fees of 2-2.5% of capital raised[iv], the placement agents likely raised $470 million to $590 million for Platinum Equity Capital Partners V.
Platinum Equity Capital Partners V was oversubscribed. Platinum Equity initially targeted $8 billion for the fund but ultimately raised $10 billion, suggesting the placement agents were not integral to the fundraise.[v]
Given that the fundraising by VolcomCapital and Magenta Capital Services was exclusively focused on non-US investors, why were their fees charged to US pensioners?
Some of Platinum Equity’s largest investors bar placement agents.
Last October, Bloomberg reported that Platinum Equity is now seeking to raise a new, even larger fund, Platinum Equity Capital Partners VI, seeking $15 billion.[viii] For the new fund, Platinum Equity has turned once again to at least one of the same placement agents, Chile-based VolcomCapital SA.
Will US pensioners again pay the cost of Platinum Equity’s fundraising from non-US investors?
[i] Platinum Equity Capital Partners V Form D, Jul 15, 2019, https://www.sec.gov/Archives/edgar/data/0001778958/000177895819000001/xslFormDX01/primary_doc.xml.
[ii] “El meteórico ascenso de Volcom en la opaca y millonaria industria de distribución de fondos,” El Mostrador, Aug 25, 2017. https://www.elmostrador.cl/mercados/2017/08/25/el-meteorico-ascenso-de-volcom-en-la-opaca-y-millonaria-industria-de-distribucion-de-fondos/
[iv] “How Do Private Equity Placement Agents Get Paid?” Houston Chronicle, Dec 17, 2021 https://work.chron.com/private-equity-placement-agents-paid-29012.html.
[v] Platinum Equity Capital Partners V Form D, Jul 15, 2019, https://www.sec.gov/Archives/edgar/data/0001778958/000177895819000001/xslFormDX01/primary_doc.xml. Platinum Equity Capital Partners V Form D/A, Jan 8, 2020, https://www.sec.gov/Archives/edgar/data/0001778958/000177895820000001/xslFormDX01/primary_doc.xml.
[vi] Public Investment Memorandum, Platinum Equity Capital Partners V, L.P., Apr 29, 2019, .
[vii] “New York City Pension Funds Enact Placement Agent Ban,” Media release, Jun 9, 2014 https://comptroller.nyc.gov/Newsroom/New-York-City-Pension-Funds-Enact-Placement-Agent-Ban/.
[viii] “Platinum Equity Eyes $15 Billion Buyout Fund, First-Ever Credit Vehicle,” Bloomberg, Oct 26, 2021, https://www.bloomberg.com/news/articles/2021-10-26/platinum-eyes-15-billion-buyout-fund-first-ever-credit-vehicle.