Not the annual management fee, but all the ancillary fees that often serve to enrich the general partner at the expense of its portfolio companies (and, consequently, the fund’s limited partners).
My bias would be to eliminate such fees altogether, and perhaps someday we’ll get there. In the meantime, the best we can hope for is that buyout firms share more of these noxious fees with their investors. Not only for the sake of fairness, but also because fewer fees in GP pockets could diminish GP interest in charging fees in the first place.
To that latter point, The Blackstone Group reportedly has altered the transaction fee split for its new global mega-fund, which is expected to close on June 30. The buyout behemoth traditionally has shared such lucre 50/50, but now is shifting toward LPs with a 65/35 arrangement. The article did not say if Blackstone also would change the splits on portfolio monitoring fees (although it should, if it hasn’t).
Blackstone’s move here is clearly an effort to curry favor with LP fence-sitters, and it should have moved closer to the 100/0 split advocated by ILPA (and exhibitted by firms like Warburg Pincus). But any movement away from GP fee-hogging is a positive, so kudos to Blckstone Group today. It didn’t do perfect, but it done good.