MANAGEMENT FEE REDUCTION POSSIBILITIES.
In the current economic climate, several opportunities for
reduced management fees exist for investors in private equity
funds.
First, some funds have come back to their original investors,
needing additional capital to support their existing (leveraged)
investments. Where the original investors agree to commit
additional capital, they have generally been able to negotiate away
management fees.
Second, some private equity funds have extended fundraising
beyond their originally contemplated 12 month period. In these
situations, investors frequently succeed in negotiating reduced
management fees, so that the "fee lookback" from final
closing is capped at 12 months. The rationale is especially
compelling where the fund has made few investments during the early
part of the fundraising period, and where the management fee is
high (with significant room for reduction).
