The Problem With Cutting Fund Sizes
News that first-time fund West Hill Partners would fold reveals a slightly unsettling truth about shrinking fund sizes: While the move has been applauded at some mega-funds, it can be a death sentence for those in the middle market. It’s just another reason for LPs to decline new commitments, even with old relationships. ‘What if the GP cuts its fund size, and we are suddenly over-exposed?’ they worry. That’s the fate West Hill suffered. The commitments it had gathered were contingent on the firm meeting its entire target. When it wasn’t able to do so, the investors backed out. The situation is happening with more firms than just West Hill.
20 March 2009•2 mins read
