GPs overseeing multibillion funds have not changed the level of management fees charged to LPs since the 2008 financial crisis, according to King & Wood Mallesons 2016 Private Funds Terms Survey.
The law firm surveyed 60 funds, including four secondaries vehicles, that closed in 2015.
A comparison of fees paid by funds in 2008 and in 2015 showed that funds of €2 billion or more typically took a 1.6 percent management fee, while funds of €3 billion or more charged 1.5 percent.
Managers supervising funds of between €1 billion to €2 billion increased management fees slightly from 1.7 percent in 2008 to 1.8 percent in 2015.
Smaller funds of between €400 million to €1 billion saw a reduction of management fees over this period. These funds charged fees of 1.8 percent fees last year, compared to 2 percent in 2008.
The trend for fee levels to remain consistent over the years, despite the pressure GPs are under from LPs to reduce fees, was also recognized by law firm Proskauer in research published exclusively in sister publication pfm in March.
Proskauer’s research, which compared limited partner agreement (LPA) terms of 30 funds raised in the last 18 months to the LPA terms in prior funds, found that over two-thirds of private equity firms have kept their management fees for new funds at the same level as their prior funds, both during and after the investment period.
However, these statistics alone do not show the bigger picture as the overall level of fee income that managers now receive has reduced, even if headline management fee rates have remained static, KWM wrote in a recent comment post.
The data from the KWM survey did not take into account any “early-bird” fee discounts that managers may offer to investors in order to get them into their fund as quickly as possible, or fee discounts based on the size of an investor’s commitment, with the best discounts reserved for the largest investors.
All 60 funds surveyed had a European focus with a range of strategies including buyout, venture, infrastructure, debt, real estate and fund of funds. The sizes of the funds ranged from approximately €400 million to over €3 billion.
A spokeswoman for KWM declined to say which secondaries funds were included in the survey.