When investors default – part 1: commitments and consequences

In this article, the first of two (click here to read the follow up article), we look at what happens when an investor in a private equity fund defaults on its obligation to meet drawdown requests; the effects of a default on the fund manager and the other investors; and the tools available to the…

Reaching limited partnership agreement: How has GP/LP alignment shifted?

Every year, MJ Hudson surveys the terms of a broad sample of recently-closed private equity (PE), venture capital (VC) and growth capital funds, where we have advised either the fund manager or a prospective investor. In our last article, we looked at the shifts in core economic terms (fees, hurdles, carried interest) revealed in our…

Top tips for negotiating the LPA

Negotiating a private equity fund’s LPA can be a difficult, intricate process. If not managed properly, fund organisational expenses and LP due diligence costs will be higher than expect, and closing deadlines may slip. Here are seven top tips to speed managers and investors through a successful LPA negotiation. Be a frontrunner A strong first…

Will private equity benefit from standardised documents?

There is no single “off-the-shelf” package of documents for a private equity fund. Instead, every fund manager (with the help of its lawyers) develops and negotiates the fund’s limited partnership agreement (LPA) with its investors (and their lawyers). The practice of negotiating side letters with specific investors, generally to confer privileges or accommodate special requests,…

Private equity fee validation: Turning on the lights

For both U.S. and European allocators to the private equity asset class, it is increasingly clear that establishing a fee validation program can be a very complex undertaking. “Can i get some help over here?”… This could very well be the rallying call for LPs as the face challenges in unraveling their private equity fees….

LP intel

Attention LPs – Effective ESG implementation Some months ago, MJ Hudson shared a missive on ESG and making it great again.  Unlike some, MJ Hudson likes to follow through on its ideas.  Accordingly, MJ Hudson has since conducted a considerable amount of research and prepared a Guide on all things ESG – a copy of…

Private equity fund terms in 2017: What’s changed?

Every year MJ Hudson evaluates the terms of a large, diverse and representative sample of newly-closed private equity funds where we advised either the fund manager or prospective investors. (You can find our 2017 Private Equity Fund Terms Research report here.) In this article we explain what’s changed since last year and where fund terms…

New kid on the block: The private fund limited partnership

Private equity funds are almost always formed as limited partnerships, but in Britain the statute that governs limited partnerships wasn’t originally drafted with fund managers or investors in mind and it has barely changed in the last 110 years. Until now. The private fund limited partnership remains a limited partnership, but with several notable advantages…

When investors default

In this article, we look at what happens when a limited partner in a private equity fund fails to meet drawdown requests, the effects of a default on other LPs, and the tools which managers have available to deal with the situation. When an investor subscribes capital to a private equity fund, generally it does…

Taking security for fund partnership debts

Lending to a private equity fund for its own purposes is not as straight-forward as lending to corporates. This article examines how lenders can secure their loans, and the impact of that security on managers and investors. Why borrow? Leverage in a private equity fund structure is mostly injected at acquisition level and rolled on…

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