Chart of the week: Priority returns remain a fixture for buyout firms

General partners often agree to provide some annual rate of return to investors before taking their share of profit, giving limited partners additional security that they won’t end up in a clawback situation. (Hellman & Friedman and Warburg Pincus famously don’t offer priority returns.) This has become especially true for North American buyout firms, where over three-quarters have them, according to Buyouts Insider’s “PE/VC Partnership Agreements Study” for 2016-17. While priority returns are less popular in venture funds, both internationally and domestically, their numbers are up from when we last conducted a similar survey two years ago.

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