While the median investment management fee paid by institutional investors for private equity deals during the investment period is between 1.75 per cent and two per cent, it drops only slightly to between 1.72 per cent to 1.96 per cent following the investment period, according to a new report from Callan.
The report analyzed more than 400 private equity partnerships representing fund offerings from 2018 to 2024. It found nearly two-fifths (37 per cent) of institutional investors committed to limited partner deals worth US$10 million in the private equity market.
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Compared to asset management fees in the public markets, fees for private equities haven’t come down and have remained stable over the last seven years, said the report, noting most private equity managers have maintained the same fee across multiple funds.
Most funds charged 20 per cent of carried interest and 84 per cent of funds had a preferred return of eight per cent, the report noted
“With each year, the study’s dataset broadens, and we now include a variety of general partners and strategy types,” said Ashley Kahn, senior vice-president in Callan’s alternatives consulting group and the report’s author, in a press release. “The growing size of the dataset becomes more representative of the broader private equity industry. With data now stretching back seven vintage years, we have a greater ability to see trends in fees over time.”
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