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Bailey McCann, Opalesque New York for New Managers:

Emerging managers are responding to the new era of uncertainty by trying to exert a bit more control over fund terms, according to a new report from law firm Walkers. Managers are using longer and harder lock-ups, focusing on liquidity management with gates and side pockets, and changing investment strategies to be more responsive to the current market regime.

Tighter terms

Half of funds launched this year used some form of lock-up, more than in any previous year of the Walker's survey. 60% of respondents reported having hard lockups of 18 months or longer. Hard lockup periods are lengthening but, it's too early to call it a trend. The use of gates has also grown. Over 40% of funds employed some type of gate this year.

Downward pressure on fees continues, data in the report show that many managers are launching with a tiered fee structure. Investors that get in early will generally pay lower management fees. Incentive fees have fallen as well, with most funds charging in the range of 11-19%.

2020 was also a big year for fund documentation. Many established funds are winding down or turning into family offices. The authors of the report note that the trend has provided a learning opportunity for emergin......................

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