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PE HUB Wire Highlights, 8.20.19

Who pays the adviser fee in a fund revamp?, CalPERS PE overhaul and media issues

Happy Tuesday!

Who should pay the adviser fee in a GP fund restructuring? That’s a question that came up in a recent interview I had with a secondary professional. The question is, who hires the adviser and where does the adviser’s fiduciary duty lie, with the GP or LP, or both?

I’ve often heard that paying the adviser varies from process to process — many times it falls to the fund. But I’ve also heard that the new investor or investors will pay for the adviser. But the issue is that the adviser is, or should be, working on behalf of the GP and the LP.

“It’s not uncommon for the GP to have a bit more sway over the adviser relative to the other LPs,” this person told me. “The critical role the adviser plays in these to make sure they’re balanced and fair and it’s the adviser’s responsibility to make sure LPs aren’t getting fleeced.”

This function is so vital that in some rare situations, fund LPs have brought in their own adviser. It’s hard for me to imagine an efficient, cost-effective fund restructuring that involves two advisers attempting to work together. Have you heard of situations that involved two advisers? How did that work? Reach me at

Institutional Limited Partner Association recommends LPACs should have all relevant information necessary to assess potential situations and, if necessary, get the support of independent professional advisers. This is especially valuable in highly complex deals with the potential to overburden the LPAC, or when the GP “failed to consult with the LPAC on the adviser selection and compensation,” according to ILPA’s best practices.

The SEC also has taken special interest in this part of the process, this person said. We’ve heard for years that the SEC has been scrutinizing fund restructurings, but only one I can think of actually led to any sort of SEC enforcement.