| Key term | 2007 trend (pre financial crisis) | 2011 trend |
| Waterfall structure | Mostly deal-by-deal returns | Seeing an increasing trend toward full pooling of returns as opposed to deal-by-deal returns, which were
common on the legacy funds |
| Carried interest | 80/20 the typical structure, with a 50/50 distribution to get to the agreed-upon profit split | 80/20 the typical structure, with a 60/40 or 70/30 distribution in favor of limited partners (LPs) to get to
the agreed-upon profit split becoming increasingly prevalent.
New trend — carried interest to be reviewed by auditors before payment |
| Preferred returns | Mostly 9% | Should be calculated from the day capital is contributed to the point of distribution.
Average of 8.8% |
| Target returns | Levered returns of 20%+ | Levered returns of 16%–20%+ |
| Investment period | Average of four years | Generally now being scaled back to three years |
| Overall fund period | Eight-year period, with option to extend for two one-year periods | Evidence suggests shorter fund durations, now six years on average vs. the typical eight year-term precrash,
with the option to extend for two one-year periods |
| Clawback provisions | Generally did not extend beyond the term of the fund | The period should extend beyond the term of the fund, including liquidation and any provision for LP giveback of distributions |
| General partner (GP) commitments | Standard of 1% | LPs are expecting aggregate GP commitments to be meaningful. This should be contributed through cash and not through the waiver of management fees |
| Management fees | Average of 1.5% of capital commitment during investment period and invested capital after investment period | Based on actual costs incurred by the GP on a cumulative basis and capped — with many having .5% on committed capital and 1.35%–1.75% on invested capital, but can go lower depending on size of committed capital and can vary based on commitment period and investment period |
| Leverage (maximum) | Averaging in the 65%–75% range | Averaging in the 60%–70% range |
