Thu, Jun 4, 2020
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Other Voices: Management fee - you are always on my mind

Monday, March 30, 2020

By: Robert Seber, Vinson & Elkins

This Q&A attempts to answer some questions that may be on the mind of private equity sponsors who are nervous about the reactions of their LPs to the current crisis.

Can our LPs terminate our fund?

You need to check your fund agreement. According to the most recent MJ Hudson survey, 58% of private equity funds permit a majority or supermajority of LPs to terminate the fund. In most cases, though, the termination right may only be exercised after a standstill period (e.g., two years) following the final fund closing. If the fund has already made investments, it would be unwise for the LPs to force a liquidation of the portfolio at depressed values.

Can our LPs terminate or suspend the investment period?

You need to check your fund agreement. According to the same MJ Hudson survey, only 26% of private equity funds permit a majority or supermajority of LPs to terminate or suspend the investment period. Any termination or suspension would result in a step-down of the management fee. If your LPs do have this right and you are concerned that they may organize to exercise it, we recommend that you are proactive and consider the options we outline below.

Can LPs refuse to fund capital calls? Can they involve force majeure?

Generally no. Fund agreements typically excuse LPs from participation in specific investments based on regulatory, tax, or ERISA prohibitions or limitations, but not for general economic o......................

To view our full article Click here

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing: Millennium hedge fund ups bet against Bank of Ireland, Value rotation was the last thing big funds thought would happen, Al Gore's firm sold Amazon and Microsoft stock. Here's what it bought.[more]

    Millennium hedge fund ups bet against Bank of Ireland From Independent: US hedge fund Millennium International Management has raised its bet against Bank of Ireland's shares. It comes as Davy says 2020 will be a write-off for banks, with losses across Irish lenders of €4bn. M

  2. PE/VC: Private equity in the Covid-19 crisis, Carlyle's Africa dealmakers leave to start their own buyout firm, UK asset managers plan shift to off-market strategies including private equity[more]

    Private equity in the Covid-19 crisis From Morning Star: Private equity investment trusts invest in unquoted companies not yet listed on the stock market. How have they fared in the sell-off? Investment trusts have been caught up in the market turmoil of recent months and private equit

  3. New Launches: Apeira Capital seeks $200m for hedge fund-like bets, PIMCO filing reveals ESG fund launch could be ahead, BEA Systems co-founder launches venture fund, Salesforce Ventures launches $125m Europe Trailblazer Fund, The D. E. Shaw group closes first onshore China investment fund, Legg Mason and ClearBridge launch non-transparent ETF, Hong Kong-based asset manager MaiCapital launches actively managed bitcoin hedge fund[more]

    Apeira Capital seeks $200m for hedge fund-like bets From Bloomberg: Natalie Hwang, the former head of Simon Property Group Inc.'s venture capital arm, has launched a new firm and is seeking $200 million for a debut fund. Hwang has been discussing the vehicle with prospective investors, ac

  4. New Launches: Hedge fund Angelo Gordon raising $1.5bn for distressed energy debt, Amundi unveils eight new funds as part of ESG ETF range push, Mezzanine Management gears up for direct lending fund[more]

    Hedge fund Angelo Gordon raising $1.5bn for distressed energy debt From Reuters: Hedge fund Angelo Gordon & Co aims to raise as much as $1.5 billion to buy the debt of distressed oil and gas companies, according to a person familiar with the matter and an investor presentation viewed by R

  5. Tech: Robos fail their first big test, 'Video is fine': Venture capitalists find the benefits in digital due diligence[more]

    Robos fail their first big test From Advisor Perspectives: Robo-advisors faced their first big challenge with the bear market in the first quarter of 2020. They lost, and that is an ominous sign for the future of automated advice. All robos employ a degree of active management. They