CVC Capital Partners is offering a discount on management fee to limited partners making large commitments to its latest fund, CVC Capital Partners VII, according to documents prepared for the New Jersey State Investment Council's 29 March investment meeting.
As previously reported, CVC's seventh buyout fund is for the first time offering a 6 percent hurdle rate, slightly below the 8 percent market standard, to reflect a lower return environment in private equity.
The firm is also offering slightly better economics in management fees charged to its limited partners. During the commitment period, LPs who commit less than €100 million will pay a 1.5 percent fee, while those with commitments of between €100 million and €250 million will be charged 1.425 percent, the materials showed.
During the investment period, all LPs will pay 1.25 percent in management fee once either the commitment period ends or CVC begins to earn management fees on successor funds, whichever comes first, the materials said.
The carried interest is set at a standard 20 percent.
The London-based firm is making a 3 percent GP commitment to this fund, which follows the strategy of its predecessors, the documents showed. Fund VII will target equity investments of between €150 million and €750 million in companies in North America and Europe.
At the meeting, the investment council proposed a commitment of up to €100 million in the fund. Council chair Brendan Thomas Byrne said the Trenton-based pension would make a decision after side letter negotiations reach an agreement.
A person familiar with the matter told Private Equity International that the firm is likely to hold a close in May, although it's not clear whether New Jersey will be part of that close considering it intends to continue discussing some terms and conditions with CVC through side letters.
CVC's earlier fund, the 2008-vintage CVC Capital Partners V, was generating a net internal rate of return of 17.5 percent, as of 30 September, the materials showed.
The most recent fund, CVC Capital Partners VI, closed on €10.9 billion in 2013.
CVC declined to comment.