Calpers Leads Buyout Fee Fight as Blackstone Weighs Concessions
Date: December 17, 2009
California Public Employees’ Retirement System is leading a push by investors in private- equity funds for lower fees and more disclosure. So far, only a small number of fund managers is making concessions, and they are limited.
Blackstone Group LP and First Reserve Corp. have held fee talks on new funds for infrastructure investments, according to people familiar with the firms. Carlyle Group, PAI Partners and TPG have changed terms or allowed investors to cut commitments, and Fortress Investment Group LLC told an investor this month it may consider lowering management fees. Avenue Capital Group is offering clients lower fees for a new distressed fund, said two people familiar with the talks.
Firms may avoid broader concessions as the 65 percent surge in stocks boosts the value of holdings and as buyouts rebound with the recovery in debt markets. Only 18 fund managers have endorsed guidelines proposed by the Institutional Limited Partners Association in September that urge better terms for investors, know as limited partners. ILPA, which represents 215 institutions with $1 trillion in private-equity assets, is pushing for the rules after many of its members posted record losses on investments last year.
“We are discouraging the use of fees as profit centers,” said Joncarlo Mark, senior portfolio manager at Calpers, the largest state-run U.S. public pension, and chairman of ILPA. “Too much of the general partners’ income was coming from fees instead of the appreciation of investments.”
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Source: Bloomberg
