50% of investors worldwide worries over problematic PE fund fees

But 61% is willing to pay more to access better fund managers.

According to a release, the latest Preqin investigation into fund terms and conditions has shown that management fees are still causing significant unrest amongst investors, but almost two-thirds are willing to pay more to access fund managers with strong track records. Other areas of contention include GP contributions, carry, hurdle rates and rebates.

The study was conducted for the 2011 Preqin Fund Terms Advisor, which shows the benchmark terms and conditions and also the actual terms employed by individual vehicles.

The Findings:

50% of LPs feel that there is a misalignment of interests between themselves and fund managers when it comes to management fees.

71% of investors are considering new GP relationships in 2011, and just 29% will only invest with existing fund managers.

The mean management fee during the investment period for the largest funds has dropped to 1.71% in the past year.

61% of investors stated that they would be willing to pay higher fees for access to fund managers that they perceive to have the best track records.

The mean rebate of transaction and other fees by buyout fund managers to LPs is now 83%, the highest level ever.

69% of LPs would consider not investing in a fund if it did not conform to the ILPA Principles.
A significant number of investors believe that GPs should invest more in their own funds in order to achieve a greater alignment of interests.