Management Fees are Top of Mind for GPs

In a swell of confidence in the dealmaking market, some GPs plan to ramp up management fees.

In a Dynamo Software survey of 100 global alternative asset managers, about 20% of respondents said they expect to increase their firm’s fees over the next 12 months, a significant bump from just over 5% at the beginning of 2023.

The report attributes this shift to mounting optimism among GPs. In 2023, higher interest rates, depressed exits and uncertainty in the market bogged down dealmaking and, as a result, fund returns. Private equity, for example, returned only 6.6% in H1 2023, a drop from its 10-year return of 16.4%, according to PitchBook’s latest Global Fund Performance Report.

After a rough couple of years, asset managers are anticipating a recovery in dealmaking as inflationary, recessionary and valuation concerns begin to recede. With more dealmaking comes better portfolio performance.

Signs of marginal improvement in returns have already hit the market. Fund performance in H1 2023 was up, for example, from the 1.5% drop in returns seen in Q4 2022, according to the report.

Read the rest of the article at PitchBook here.