Private Equity Portfolio Company Fees

Phalippou, Ludovic, Rauch, Christian and Umber, Marc (2017) Private Equity Portfolio Company Fees. Journal of Financial Economics. (Accepted)

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In private equity, General Partners (GPs) receive fee payments from companies whose boards they control. Fees amount to $20 billion evenly distributed over time, representing over 6% of equity invested by GPs. They do not vary with business cycles, company characteristics, or GP performance. Fees vary significantly across GPs and are persistent within GPs, even after accounting for fee rebates to LPs. GPs charging the least raise more capital post financial crisis and are backed by more skilled LPs. GPs increase fees prior to going public. We discuss how these results could be explained by optimal contracting and tax arbitrage.

Item Type: Article
Keywords: Private Equity, Monitoring Fees, Transaction Fees, Compensation, Corporate Governance
Subject(s): Finance
Date Deposited: 16 Oct 2017 08:16
Last Modified: 16 Oct 2017 08:16
Funders: not applicable

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