Private equity portfolio company fees

Ludovic Phalippou, Christian Rauch and Marc Umber

Journal of Financial Economics, 2018, vol. 129, issue 3, 559-585

Abstract: 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 limited partners (LPs). GPs charging the least raise more capital postfinancial 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.

Keywords: Private equity; Monitoring fees; Transaction fees; Compensation; Corporate governance (search for similar items in EconPapers)
JEL-codes: G20 G23 G24 G32 G34 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:129:y:2018:i:3:p:559-585

DOI: 10.1016/j.jfineco.2018.05.010

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