“You know what we got here? We got an elastic product. You know what that means? That means when people can go elsewhere and get their [business] done, they going to do it. You acting like we got an inelastic product and we don’t!” – Stringer Bell (The Wire)
As an industry, private markets should be doing more to improve commercial terms, starting with the development of innovative fee arrangements to enhance alignment and also making private markets an attractive investment alternative for investors to consider.
The current “2 and 20” model on committed capital is not working, particularly for emerging managers with very similar product offerings. Our latest article sets out our view on why the existing model is outdated and how managers can improve their terms without necessarily compromising on their economics but also giving investors what they need.
We hope you find the analysis and our views on the current commercial arrangements useful and that we’ll start seeing some potential innovation being applied across the market. With any luck this will lead to more private markets allocation by South African retirement funds.