Evolution of the alignment of interests between Limited and General Partners, through the analysis of terms and conditions from European Private Equity and Venture Capital Funds

This Master’s thesis investigates the evolution of the alignment of interests between Limited and General Partners, through the analysis of certain terms and conditions, namely the management fees during and after investment period, the cap on management fees, the carried interest, and the hurdle rate, from European Private Equity and Venture Capital funds. As the private equity market has become increasingly important and competitive since the Great Financial Crisis, it is interesting to see if this has led to an evolution in the relationship between investors and fund managers and what are the explanatory variables and drivers. To do so, following the literature review that describes the private equity ecosystem and studies the notion of alignment of interests, a quantitative study is carried out based on data from the European Investment Fund. Then, five semi-directive interviews with Private Equity and Venture Capital experts working at the EIF are conducted to collect their opinions on the results found and to conclude on the evolution of the terms and conditions and their impact on the alignment of interests between Limited and General Partners. As a project master thesis, the aim is to provide the EIF with a study on the evolution of this alignment of interests post GFC so that they can have a better global view which might be useful for future negotiations.