Pension Risk Matters

According to Wall Street Journal reporter Pui-Wing Tam, hedge funds are not alone in reducing their fees to entice investors. As laid out in "Venture Funds Sweetening the Terms," fund-raising is down 65% from $58.2 billion in 2008 to $20.4 billion as of the beginning of November 2009. To offset a difficult economic environment, allay concerns about longer times to exit and diminished returns reported by some managers, performance-linked fees are being put on the table.

In a related article in the same paper, the Initial Public Offering ("IPO") thaw is described as imminent. According to "Issuers Look to 2010" by Lynn Cowan (November 23, 2009), underwriters prepare to help private businesses make their public debut. Notably, nearly 40 companies have "filed paperwork to start the IPO process, compared with eight during the same period of 2008."

It will be interesting to watch whether IPO-related liquidity leads to any retraction of performance-linked venture capital fees currently being offered to limited partners.