Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 Defined Contribution East
    • 2023 ESG Investing
Breadcrumb
  1. Home
  2. ALTERNATIVES
July 27, 2016 01:00 AM

Pension Bridge conference: Private equity managers stay firm on 20% carried interest

Arleen Jacobius
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    Buyout managers might be cutting their management fees some, but they are by and large maintaining 20% carried interest, said speakers at the Pension Bridge Private Equity Exclusive conference in Chicago on Tuesday.

    Firms are taking the same share even though private equity managers on a buyouts panel acknowledged expected returns are dropping and they are monitoring their portfolios for recession risk.

    Laureen Costa, managing director and portfolio manager of private equity with J.P. Morgan Asset Management, said: “Not all 2% management fees are evil, especially if you are looking at emerging manager funds.”

    At the smaller private equity and emerging manager level, a 2% management fee is needed to “keep the lights on,” she said.

    However, Keirsten N. Lawton, co-head U.S. private equity group at consulting firm Cambridge Associates LLC, said fees can make a difference in returns, especially now.

    In a market where returns are expected to be lower than in the past, investors can offset that some by lowering fees, she said.

    However, when the panel’s moderator Brad Young, co-CEO and head of investments at private equity firm Altius Associates, asked whether the standard 20% carried interest should be cut in light of expected lower returns, the answer was “no.”

    Ms. Lawton said she has seen slightly lower carried interest in credit funds where some general partners could go as low as 15%, but in buyouts cutting carried interest is “a negative signal” to limited partners.

    A number of speakers on other panels at the conference agreed they expect private equity returns to be lower. Nevertheless, many expect investors to continue to pile into the asset class because its returns still are expected to handily outperform stocks and bonds.

    In the past six months, executives at Adams Street Partners LLC reviewed 58 RFPs for private equity managers, compared with 61 RFPs for all of 2015, said T. Bondurant French, executive chairman of the private equity firm, who was speaking on a panel on the state of the private equity market.

    Most of the speakers on that panel — including moderator Sam Green, private equity investment officer at the Oregon Investment Council, Tigard, which runs the $68 billion Oregon Public Employees Retirement Fund — were sanguine about a relatively new development in which private equity general partners are taking out lines of credit to leverage their funds.

    “There’s some controversy, but I am largely in favor if they (general partners) use credit lines properly,” said Paul R. Yett, managing director of alternative investment money manager Hamilton Lane, who spoke on that panel.

    Some managers use lines of credit instead of calling investor capital, thereby easing limited partners’ capital call burden, Mr. Yett said.

    “I expect general partners to be good managers of their funds … and subscription line (lines of credit) rates are very attractive right now,” he added.

    John Connaughton, co-managing partner and head of global private equity at private equity firm Bain Capital, who spoke on the same panel, said leveraging portfolio companies and then leveraging equity on top of that “could be like the boiling frog.”

    “It’s not a good idea,” he said.

    That same panel also discussed private equity firms going public.

    Bo Ramsey, director of private equity at the $29.9 billion Indiana Public Retirement System, Indianapolis, said he still views publicly traded private equity firms the same way he did when the firms first started going public — around 2007 in the U.S. — “with a heightened degree of skepticism.”

    “What business model do they have? Do they generate fees off assets under management,” he queried.

    “I have the same concern about backing public general partners with multiple platforms,” Mr. Ramsey said. “We pick our spots with public GPs where they can really add value.”

    Related Articles
    Fee conundrum continues to confound asset owners
    Regulations and fees dominated the news headlines during 2015
    Outsized demand for quality private equity funds hampering CalPERS' quest to lo…
    Preqin: More private equity funds setting higher hurdle rates
    Partners Capital names new CIO
    Recommended for You
    Ex-Goldman President Schwartz is top contender for Carlyle CEO
    FS Investments and Portfolio Advisors ink deal to create $73 billion alternatives manager
    FS Investments and Portfolio Advisors ink deal to create $73 billion alternatives manager
    ONLINE_190529857_AR_0_WWPEWVXMXAAN.jpg
    Alternative assets generally saw a banner year in 2022 – Preqin
    The Institutional Investor's Guide to ESG Investing
    Sponsored Content: The Institutional Investor's Guide to ESG Investing

    Reader Poll

    January 25, 2023
    SEE MORE POLLS >
    Sponsored
    White Papers
    Show Me the Income: Discovering plan sponsor and participant preferences for cr…
    The Future of Infrastructure: Building a Better Tomorrow
    Outlook 2023: Opportunity in a volatile world
    Research for Institutional Money Management
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 Defined Contribution East
      • 2023 ESG Investing