CV Fee Terms Converge Amid a More Competitive Market – Morgan Lewis

Why It Matters

Standardized CV fee terms lower cost friction and improve capital allocation efficiency, benefitting both limited partners and general partners in an increasingly competitive private‑equity landscape.

Key Takeaways

• Best‑practice fee terms are overtaking ad‑hoc negotiations
• Competitive pressure drives fee compression across CV deals
• Standardized hurdles and extensions improve investor alignment
• LPs gain greater transparency and predictability in CV contracts

Pulse Analysis

The continuation‑vehicle market, a fast‑growing segment of private‑equity secondaries, is entering a phase of fee‑term convergence. Historically, sponsors crafted bespoke fee structures to win mandates, often resulting in disparate management fees, carried interest hurdles, and extension clauses. Today, heightened competition among GPs and a more sophisticated LP base are pushing the industry toward a set of best‑practice benchmarks. These benchmarks emphasize lower management fees, clearer hurdle rates, and standardized extension mechanisms, reducing the friction that once plagued deal negotiations.

For limited partners, the move toward uniform fee terms translates into greater predictability and lower overall cost of capital. Consistent fee frameworks enable LPs to compare opportunities across managers more effectively, fostering a more competitive environment that rewards operational excellence rather than fee arbitrage. Meanwhile, general partners benefit from streamlined negotiations, allowing them to allocate more resources to sourcing and managing assets rather than drafting bespoke contracts. The alignment of interests inherent in best‑practice terms also mitigates potential conflicts during the life of a continuation vehicle.

Looking ahead, the standardization trend is likely to accelerate as secondary market participants seek to differentiate through execution rather than pricing. Emerging players may adopt these benchmarks as a market entry strategy, while incumbent firms will refine their fee structures to stay competitive. The convergence of CV fee terms not only signals a maturing market but also sets the stage for increased liquidity, broader investor participation, and more efficient capital deployment across the private‑equity ecosystem.