Global consultancy Watson Wyatt has published a white paper on private equity fund terms and conditions. This follows a recent guidelines proposal from ILPA, and emphasizes some of the same points.
For example, Watson Wyatt writes that “management fees currently represent too high a proportion of a GP’s current compensation and are therefore the most significant factor misaligning the interests of a GP relative to those of its LPs.”
Watson Wyatt also presents some solutions, including budgeted fees (like some VC firms use), installing “European waterfalls” and a ban on portfolio company monitoring fees (amen!).
What I’m really waiting for now is some sort of GP justification of current fee structures, other than “because we can.” I still believe most LPs would give up some carry for decreased fees…. You can download the white paper here, or read it below: