Year-End Spotlight: GPs throw lifelines

Quite a few mega-firms engaged in goodwill actions with LPs over the course of 2009.

TPG, Permira, Apax and Sun Capital Partners were among the fund managers that offered limited partners the chance to cut back on their commitments to previously closed funds, providing a lifeline to investors with liquidity or over-exposure issues.

Year-End Spotlight

TPG twice offered investors the chance to scale back commitments to its $6 billion financial services fund, reducing the size down to about $2.5 billion. The private equity firm said the action was not because of investor liquidity issues but because the deal environment became less attractive after the US government intervened and bailed out several US banks.

It also planned to return $20 million in fees to LPs in its sixth global buyout fund. “We took this proactive step in order to share the economic cost of a deal market that has been slower than anyone anticipated,” James Coulter, TPG co-founder, said during its recent annual investors' meeting.

Slowed deal pace was also the rationale behind the return of fees and or carry by fellow mega-firms Permira and Terra Firma.

Terra Firma told LPs it would return carried interest accrued since 2004, a sum amounting to around €80 million. “Our investors have suffered and therefore our rewards should suffer at the same time. Such longer-term rewards throughout the entire financial system would have led to a very different world to the one we find ourselves in today,” Guy Hands, Terra Firma's founder and chairman, said in the firm's annual review.

For comprehensive information on these GP-LP issues and more, consult the list of archived PEO coverage to the right.