Is there LP appetite for low-fee low-overhead PE funds?
As more and more GPs bloat up with "Value Creation" or "Portfolio Solutions" teams (who cost significantly more than traditional back-office and come from MBB or operator backgrounds), a hungry new fund coming to market could make the following value proposition:
50th percentile PE exposure at a fee structure closer to 1/7.5 instead of 2/20.
Not trying to get impressive IRRs or do any fancy special situations/distressed turnarounds, just vanilla corporate buyouts while penny pinching on everything that traditional PE shops shell out for (sell-side fees, legal fees, creditor fees, back office, value creation, employee benefits).
Sounds like hell.
Yeah from a junior perspective, but for founding partners it'd be worth the tradeoff to get early fundraising momentum based on low fees value prop
The GPs you're referring to typically do not charge 2/20
How much are they charging
If you have to ask you can't afford it
125 mgmt fee / 12.5% performance after a hurdle is common but it depends on the vertical/fund. Everyone also looks at IRRs net of fees, so as long as they are making solid money no one is penny pinching on management fees. The free IRR days are also gone, if you have no value creation strategy good luck to you.
Also not sure how you intend to negotiate legal fees down significantly, manage funds without much back office or attract quality investment talent with poor employee benefits.
If slashing fees to gain share actually worked, one of the emerging managers would have done it already. Institutional investors are just not that price sensitive when it comes to PE.
TLDR -- You are going to need to do a lot more research
Why would anyone sign up for that?
That's just silly. You're not selling widgets to retail trying to compete on price you're offering a processional service to institutions. If you're charging half/less than half the fees, they are going to assume it's half/less than half the quality.
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