The other day I was checking a GP, and noticed that one of the latest vintages displayed a lower Gross-to-Net erosion compared to initial vintages (which does not make much sense at first sight).
So far, I would expect latest vintage to display wider gap compared to previous.
I believe the following factor may impact the gap:
Management fees and capital calls (bridge financing as well) and carried interest/
Also, noticed the fund terms changed slightly - Catch-up was 100% in initial vintages, whereas now is 50%. Would this have a strong impact?
Keen to hear your views / opinion.
Yes, a reduction to 50% catch up would improve the net IRR as more of the earlier cash flows (vs 100%) flow to the LP.
Understood. Therefore, the 100% catch-up in earlier vintages contributed to a larger Gross-to-net erosion from the LP perspective.
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