Callan's Private Equity Fees and Terms Study Reveals How Partnerships Compare across Key Metrics

Terms continue to remain predominantly general partner-friendly despite the COVID-19 pandemic

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Dec 07, 2021, 07:30 ET

SAN FRANCISCO, Dec. 7, 2021 /PRNewswire/ -- Callan, a leading institutional investment consulting firm, announced today the release of its Private Equity Fees and Terms Study, which analyzes the fees and terms for 187 private equity partnerships. As a comprehensive update to its inaugural 2020 study, the study helps institutional investors better evaluate private equity funds and serves as an industry benchmark when comparing a partnership's terms to its peers.

Key Findings:

Most funds (2/3) had an American waterfall, which has remained relatively consistent over the past four years.
The most common carried interest percentage was 20% (86% of funds). Some funds, typically venture capital (VC), charged carried interest as high as 25% or 30%.
The median management fee during the investment period rose from 1.75% in the 2020 study to 2.00%, which was driven by an increase in venture capital and small buyout funds in the dataset
Similarly, the median management fee post-investment period was 1.75%, a large jump from the 2020 study (1.50%).
The median general partner (GP) commitment has hovered around 2.5%-3% over the last four years with the aggregate median at 3%.

What's New:

In assessing the pandemic's impact, Callan found that demand for private equity in 2021 continued to strengthen despite a dip in fundraising in 2020.
A larger dataset enabled Callan to expand its analysis to incorporate comparisons by year and strategy type. With every study, the dataset broadens and becomes increasingly representative of the private equity industry.
Callan's increase in coverage of small buyout and VC funds had the biggest impact on results.

"The most interesting analysis is the comparison by strategy type, given the large variation in fees from large buyouts to small buyouts to venture capital," said Ashley DeLuce, CAIA, vice president in Callan's Private Equity group. "This analysis will be especially helpful when considering higher fee strategies, such as venture capital and small buyouts, by providing a more relevant industry comparison."

Find the summary blog post and survey here.

About Callan

Callan was founded as an employee-owned investment consulting firm in 1973. Ever since, we have empowered institutional clients with creative, customized investment solutions backed by proprietary research, exclusive data, and ongoing education. Today, Callan advises on more than $3 trillion in total fund sponsor assets, which makes it among the largest independently owned investment consulting firms in the U.S. Callan uses a client-focused consulting model to serve pension and defined contribution plan sponsors, endowments, foundations, independent investment advisers, investment managers, and other asset owners. Callan has six offices throughout the U.S. Learn more at callan.com.

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SOURCE Callan LLC