Private Equity International - It’s never too early for LPs to engage with GPs on clawbacks

Conversations around clawbacks on carried interest can be a sensitive topic for LPs and GPs alike. Increasingly, they are one that can no longer be overlooked as a growing number of LPs note that their PE performance has been trending downward and even dragging down their overall portfolio return.

LPs could have a claim against the GP under breach of fund agreement. This could trigger certain revenue rights or other types of provision depending on which jurisdiction the fund documentation is based.

The GP's failure to honour the clawback obligation would constitute a breach of the fund agreement and could lead to lawsuits from LPs seeking to enforce the clawback obligation, according to Alex Chauvin, a London-based partner at White & Case. However, institutional investors usually want to be seen as a sensible economic partner and do not want to be the first to sue the GP, she points out.

The full article can be found here.

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