MJ Hudson Fund Terms Research – Key Findings

Penned by Ravi Longia and edited by Eamon Devlin, the report uses MJ Hudson research to identify trends in fund terms.

The Report has received broad coverage, including Private Funds Management, Private Equity News, Financial News, Real Deals, Private Equity Wire and AlphaQ.

The Report’s overall message is that despite private equity fund managers receiving improved economic terms than found in our 2016 report, many fund managers are committed to offering other ways to align GP/LP interests through innovations in carried interest and stronger fund governance.

Some of the Report’s key findings are:

Economics:

Pro-fund manager trends:

  • GP commitment down from previous year (as reported in our 2016 report)
  • 2% management fee dominates by both number of funds and capital raised
  • 100% fast catch-up in favour of GPs predominates.

Pro-investor trends:

  • Innovations in carried interest structuring
  • 8% hurdle rate/preferred return near ubiquitous despite persistent low interest rates in recent years
  • Whole-of-carry structure dominates in UK & Europe and making inroads into U.S. funds.

 

Fund Governance:

  • GP removal and Key Person protections – vast majority of private equity funds have these protections
  • Management Fee Offset – vast majority of funds reduce the management fee by transaction fees received by the fund manager
  • Successor Fund – vast majority of funds restrict the fund manager raising a new fund during the investment period of the existing fund.

If you wish to discuss the findings of the report, please contact either Edyta Brozyniak or Eamon Devlin:

USEFUL GUIDES

Private Equity Fund Terms Research

Covering topics from both the LP and GP perspective, including economic terms and structures and much more.

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