ya
FoF is the sweetest gig ever, cant believe youre getting carry? I know most hedge fof seem to be scraping a small mgmt fee and thats it I would imagine PE will go the same way shortly. No way in hell im paying carry to an allocator.
Havent dont this specifically but every HF ive been involved in inventive is calced after mgmt fees which it seems like they are doing?
ok
Why not just copy a typical carry structure from one of the GPs you invest in? Probably the easiest way to go.
I assume this is a European waterfall model. So it will take a long time for TVPI to hit 1.45x I would think given that fund-of-funds typically have a long j-curve. It is a good hurdle from the investor’s perspective I think.
Once you have reached a TVPI of 1.45x, then I would assume you can start taking carry based on 5% of the gross profit rather than net usually, although I guess that is up to the terms of the LPA.
It is still the industry norm in PE for FoF and co-investment funds to charge carry by the way. To be fair PE returns have been excellent over the past 5 years, whereas HF returns have been an embarrassment. The hedge fund model is really struggling. How they get away with charging performance fees with no hurdle rate is one of the great mysteries of the finance world.
there’s a new comp model out there called 1 or 30. vs the 2 and 20 bs.
From discussions I have had with some PE guys I know the PE model seems to be following the hedge long term. More & more funds but the assets keep getting concentrated, regulatory environment is getting tighter like it did with hedge, PE in general would expect returns to be strong at this point in the cycle would it not?
More and more hedge seems to be pretty much the mega shops and then smaller shops that seem to operate solely on the basis of getting a few big investors and basically giving them their own SMA’s. The fact that anyone would pay 2/20 with no clawback or hurdle in hedge for mostly average returns is pretty mind blowing.
ya
Interesting. Most secondary funds I’ve seen have a 10-12 year life with extensions to 15 years. Usual fee structure is around 1% (maybe 1.25%) on committed until the end of the investment period and then a relatively steep decline in the management fee thereafter with the fee basis moving the invested capital (or NAV if lower).
Carry is typically 10% or 12.5% with 8% being the most common hurdle. The actual intricacies of calculating the carry I always leave to the fund accountants, so I’m probably not much help to you.
A 4 year structure is short. More like the timeframe I would expect from a co-investment deal. If you are buying multiple positions in funds that themselves own multiple companies, how can you expect all that to be liquidated within 4 years? Often, secondary funds have very long tails.
ya