New PE fees and terms study reveals how partnership compare across key metrics
Callan, a leading institutional investment consulting firm, has released its Private Equity Fees and Terms Study today, which analyses the fees and terms for 90 private equity partnerships to help institutional investors evaluate, and even negotiate, a partnership’s terms.
“We created this study to help investors evaluate a partnership’s terms compared to those of its peers, which is an especially useful tool when conducting due diligence,” says Pete Keliuotis, head of alternatives consulting at Callan. “We also envision that general partners may find the study useful as a way to benchmark their partnership terms.”
The study, which leverages Callan’s proprietary database, is focused on these principal terms to provide a concise snapshot of the market: minimum limited partner commitments, general partner commitments, management fees, type of “waterfall” used, carried interest percentage, and hurdle rate.
When evaluating a partnership for potential investment, Callan helps institutional investors to determine whether the terms are consistent with the rest of the market, with particular emphasis on the alignment of interests between general partners and limited partners. The snapshot provided in the study is intended to be used as a benchmark for that exercise on an ongoing basis, as the firm expects to publish this study annually.