Please see the attached Research Report for more information on Preqin’s research into the latest trends on the terms and conditions of management fees.
Highlights include:- 43% of investors polled see a power shift towards the LP when negotiating terms and conditions, only 2% see shift towards GP
- 90% of placement agents polled advising clients to change terms in favor of LP
- Mean management fee for buyout funds currently in market drops by 20 basis points vs. most recently closed funds
- Mean management fee for most recent venture funds also drops – by 15 basis points
- Largest funds cutting fees by highest amount
- LPs receiving larger share in rebated transaction fees
- More funds including key man clause and no-fault divorce clause
All data in the report is taken from the2009 Preqin Fund Terms Advisor – the industry’s leading publication on private equity fund terms and conditions featuring analysis, listings and benchmarks for funds of all types and regions. The sample used for the publication and analysis covers over 1,200 vehicles.
Comment:
The results of Preqin’s survey clearly show that investors are becoming increasingly concerned with terms and conditions. Placement agents are advising their clients to alter proposed fees in favour of the LP, and Preqin’s analysis of terms and conditions demonstrates that GPs are listening. The evidence shows that the newest funds – those just launched or currently in market – have lower fees, and are more likely to include important governance statutes such as key-man and no-fault divorce clauses. It is therefore essential that GPs carefully consider their new offerings in the light of both long-term benchmarks and also the proposed fees for the newest vehicles if they are to garner interest from investors in the current environment.
Tim Friedman, Editor of the 2009 Preqin Fund Terms Advisor