Making concessions

Of the respondents, 60% predict that returns in 10 years will be lower, 70% believe holding periods will be longer, while a whopping 80% think fees will come down over the next decade.

The findings echo the ongoing debates on GP/LP relations, with the oft-cited argument that the pendulum has now shifted in favour of LPs. Talking to one London-based lawyer, it seems some GPs are granting discounts on management fees to select LPs, in desperate attempts to secure capital.

At the time of going to press, heads of top-tier buyout shops including Carlyle Group, TPG, Avenue Capital and KKR are meeting their investors to talk fees, terms and conditions. One LP predicted that fund managers could accept lower management fees, but offset by charging a higher performance fee.

But with returns threatened by over-crowding, a less favourable economic environment for portfolio companies, and increased regulation leading to higher cost burdens, what will come out of the performance fee? Lower returns in itself is not necessarily that dramatic, but impending succession, retention and recruitment issues are.

These questions will all be investigated in the final report, sponsored by KPMG, and produced in association with the SVCA. I am presenting the results at SVCA's Riskkapitaldag 2010 in Stockholm 22 April, and the report will also be available to download on our website later this month. Watch this space.

Rikke Eckhoff

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