An analysis of HBS case Acme Trust (Private Equity finance).

1. Why is Warburg, Pincus proposing a different requital structure from the render arrangement? A five forces analysis of the toffee-nosed honor fabrication reveals that Warburg is shifting its fee structure to take good of modified customer bar solveing power from its customers while onerous to pay its access to increasingly scarce investment opportunities and traverse it to its rivals by dint of a price-war. Warburg, Pincus is proposing to shift its fee structure by big(a) its carried entertain from 20 to 15% of any capital make headway while rising its way fee from 1 to 1.5% of committed capital. Meanwhile, it aims at raise a record-breaking $ 2 billions mega-fund. unity account is that Warburg is opting for a subaltern price / high tidy sum fund training strategy. However, this does non hold since Warburg would be better off (except when assuming a low 5% annual return on investment) raising a fund similar to its 1989 one in some(prenominal) size and fee structure. More convincingly, Warburg may be on the look-out for a price war. Indeed, both its management fee and carried interest atomic number 18 now in the disappoint end of market range. The public carried interest is overwhelmingly at 20%. The median management fee is 2% for macro funds (see exhibit 6) and 2.5% for smaller ones. Interestingly Warburg has now line up its price structure at least 25% beneath the market average disregardless of the expected return on invested funds.

The increase of its management fee may only request that it was historically abnormally low compared to market averages. Another doable explanation is that Warburg is addressing the agency problem m ingled with general and hold partners. The ! exercise provides evidence that it exists some feast between the announced returns of Private Equitys funds and the actual returns change in by limited partners. Warburg may recognize it... If an assistant wrote this report...Id like to see it on my desk..it is brief, to the point, but describes its subject satisfactorily... nigh Job. If you want to get a full essay, order it on our website: OrderEssay.net

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