(Another) LP Survey Says: Fund Terms Have Changed

We’ve written a lot about LP/GP power dynamics, in which LPs have begun to flex their little-used muscles. Now we have some actual data to back up the anecdotes.

Private equity research firm Preqin just sent over results from a survey of 50 institutional investors, showing that fund terms have become more LP-friendly over the past two years. Here are some examples (verbatim from press release):

  • The mean management fee for new buyout funds (those of a 2010 vintage or yet to hold an initial close) seeking $1 billion or more in commitments is 1.59%, down 32 basis points from its peak for vintage 2008 funds of 1.91%.
  • The mean management fee for new real estate funds seeking $1 billion or more in total commitments is 50 basis points down from its peak for 2007 vintage funds, now standing at 1.25%.
  • The mean management fee for the latest distressed private equity funds seeking less than $500 million in commitments is 1.82%, down 24 basis points from the average for 2008 vintage funds of 2.06%.

Equally important is the fact that LPs remain unsatisfied. Only 58% of respondants said that GP/LP interests are properly aligned, which is down from 69% two years ago. It’s unclear if GPs will keep bending, but it’s almost certain that LPs will keep asking.

Read the full press release here