News Digest: SEC to review fee structures at private funds amid transparency concern
January 13, 2022
The Securities and Exchange Commission will take a closer look at how private investment firms including private equity and hedge funds levy various fees on their clients, and measure performance, agency chairman Gary Gensler has said.
Expressing concern over whether limited partners in such alternatives vehicles have “enough transparency” with regard to management and performance fees, as well as other expenses they have pay, Gensler said that the S.E.C. would also scrutinize how general partners use so-called “side letter” agreements with investors to circumvent fund constitutions.
The U.S. capital markets regulator’s move to review fee structures at alternative funds comes in the wake of concerns expressed by several LPs recently that many GPs are imposing extra and duplicate fees on them, including on “club deals”. It also could pave the way for minimizing conflicts of interest between fund GPs, affiliates and investors.