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Laxman Pai, Opalesque Asia: Private equity partnership fees and terms for funds in the market in 2018 and 2019 were highly uniform, indicating managers had significant bargaining power, according to a study by Callan.
More than three-quarters of the partnerships were buyout funds, and North American funds made up the vast majority of respondents, said the study entitled 'Private Equity Fees and Terms Study', which analyzes the fees and terms for 90 private equity partnerships to help institutional investors evaluate, and even negotiate, a partnership's terms.
The partnerships represented fund offerings that were in the market and reviewed by Callan in 2018 and 2019.
There was a relatively high level of uniformity for fees and terms among the partnerships evaluated, indicating that general partners have significant bargaining power-for now. This could change as the impact of the pandemic resets the dynamics of the private equity market.
Among the findings was that the general partnership commitment to a fund was 3%, with higher commitments reflecting an investment of the manager's balance sheet capital. The average GP commitment was 4.3%.
"We created this study to help investors evaluate a partnership's terms compared to those of its peers, which is an especially useful tool when conducting due diligence," said Pete Keliuotis, head of alternatives consulting at Callan. "We also envision that the general partners may find th...................... To view our full article Click here
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