Morgan Lewis Attorneys Offer LP Perspective on Negotiating PE Terms and Structuring Bespoke Vehicles (Part One of Two)

The pandemic prompted investors to consolidate their PE investments with a smaller number of large, established sponsors. The result is that new PE funds launched by those sponsors have been consistently oversubscribed, affording the sponsors leverage to push for more favorable fees, expense provisions and treatment of conflicts of interest. In addition, there has been continued growth and evolution of innovative structures, such as customized vehicles, single investor funds (SIFs) and hybrid funds. It is helpful to receive LP counsels’ perspectives on those developments, what to expect in negotiations and where LPs can push for more favorable rights. Those trends and accompanying insights into the current market for PE terms were shared by a panel at the recent Morgan Lewis Private Fund Investors Roundtable hosted by partner Jedd Wider. This first article in a two-part series discusses the Morgan Lewis partners’ thoughts on PE terms, investor allocation preferences, SIF structures and the evolution of hybrid funds. The second article will set forth highlights from the panel on recent tax developments; investment issues involving China; and the evolving trade and sanctions landscape. For additional insights from the Morgan Lewis roundtable, see our two-part series: “Latest on Key Terms, Structuring Approaches and Trends in Secondary Transactions and Co‑Investments” (Jan. 11, 2022); and “New U.K. LTAF, Updated E.U. Marketing Regulations and Trends in the Middle East Private Funds Industry” (Jan. 18, 2022).

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