• Home
  • Latest
  • Fortune 500
  • Finance
  • Tech
  • Leadership
  • Lifestyle
  • Rankings
  • Multimedia

Trendingnow

1

Ex-PepsiCo CEO Indra Nooyi worked from midnight until 5 a.m. as a receptionist to pay for her Yale degree—and she says ‘respect went up’ because of it

2

Shark Tank's Kevin O'Leary says if he were 25 today, he'd chase these two booming opportunities in the world of AI

3

China’s birth rate just hit its lowest point since 1949—and Trip.com cofounder James Liang thinks that’s a threat to innovation

1

Ex-PepsiCo CEO Indra Nooyi worked from midnight until 5 a.m. as a receptionist to pay for her Yale degree—and she says ‘respect went up’ because of it

2

Shark Tank's Kevin O'Leary says if he were 25 today, he'd chase these two booming opportunities in the world of AI

3

China’s birth rate just hit its lowest point since 1949—and Trip.com cofounder James Liang thinks that’s a threat to innovation
Financeprivate equity

Private equity giant drops key piece of investor protection

By
Dan Primack
Dan Primack
Down Arrow Button Icon
By
Dan Primack
Dan Primack
Down Arrow Button Icon
September 21, 2015, 11:38 AM ET
507833207
Track and field athlete clearing hurdlePhotograph by Tom Merton — Getty Images/Caiaimage
Add Fortune on Google for similar content.

Advent International, a $32 billion private equity firm with offices in a dozen countries, is not including a preferred return (i.e., hurdle) on its eighth flagship fund, as first reported this morning by peHUB‘s Chris Witkowsky.

For the uninitiated, hurdles are a rate of return that private equity funds must meet before fund managers can begin collecting their cut of investment profits (i.e., carried interest).

I’ve since confirmed Advent’s plans with market sources, and also learned that the firm will not be changing either its carried interest structure (20%) nor the GP-beneficial quirk whereby its 1.5% management fee does not step down over time (a feature that in the past has, effectively, delayed the hurdle from being cleared). On the other hand, Advent has removed a clause whereby it could charge limited partners upwards of 75 million euros for ‘business services,’ fees usually related to Advent putting its operating partners into portfolio companies (few of which were actually charged on Advent’s last flagship fund).

To be clear, there is some decent philosophical motive for eliminating the hurdle. Such structures were originally established to essentially mirror interest rates, so that LPs had incentives to invest in high-risk private equity funds. But with interest rates at effectively zero, an 8% hurdle (which is where past Advent funds sat) is no longer tethered to that rationale.

But, in practice, all of that is gobbledygook. If hurdles were really about interest rates, then they would be structured via some sort of “floating” mechanism. Instead, this is about Advent protecting its own downside while removing related protections from its LPs.

To be clear, I have no reason to believe that Advent won’t easily surpass 8% returns on its new fund. Even though its performance has slipped pretty consistently over the past several funds, it’s still well more than double that threshold. For example, here is some data through year-end 2014 from the California Public Employees’ Retirement System (CalPERS):

Capture

Advent, however, appears to be taking out an explicit insurance policy against either not meeting the hurdle, or perhaps finding itself near the hurdle in five to seven years and wanting to avoid the dangerous impulse to swing for the fences in order to clear it.

Remember, this isn’t a firm that has never had a hurdle — like Warburg Pincus or Hellman & Friedman — deciding to maintain its historical structure (upon which all of its compensation is built). It’s a veteran firm making an intentional change.

My best guess is that most LPs will grumble loudly and then still pony up, particularly in light of how many of them are trying to make bigger bets on fewer managers. But if Advent does indeed stumble going forward, it will have deservedly lost some goodwill the next time around.

Advent declined comment, citing U.S. securities laws surrounding fundraising activity. The firm is seeking to raise $12 billion for its new flagship fund, compared to the $10.8 billion it raised for Fund VII back in 2012.

Get Term Sheet, our daily newsletter on deals & deal-makers.

About the Author
By Dan Primack
See full bioRight Arrow Button Icon
Add Fortune on Google for similar content.

Latest in Finance

Finance
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam
By Fortune Editors
October 20, 2025
Finance
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam
By Fortune Editors
October 20, 2025
Finance
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam
By Fortune Editors
October 20, 2025
Finance
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam
By Fortune Editors
October 20, 2025
Finance
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam
By Fortune Editors
October 20, 2025
Finance
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam
By Fortune Editors
October 20, 2025

Most Popular

Finance
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam
By Fortune Editors
October 20, 2025
Finance
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam
By Fortune Editors
October 20, 2025
Finance
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam
By Fortune Editors
October 20, 2025
Finance
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam
By Fortune Editors
October 20, 2025
Finance
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam
By Fortune Editors
October 20, 2025
Finance
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam
By Fortune Editors
October 20, 2025
Fortune Secondary Logo
Rankings
  • 100 Best Companies
  • Fortune 500
  • Global 500
  • Fortune 500 Europe
  • Most Powerful Women
  • World's Most Admired Companies
  • See All Rankings
  • Lists Calendar
Sections
  • Finance
  • Fortune Crypto
  • Features
  • Leadership
  • Health
  • Commentary
  • Success
  • Retail
  • Mpw
  • Tech
  • Lifestyle
  • CEO Initiative
  • Asia
  • Politics
  • Conferences
  • Europe
  • Newsletters
  • Personal Finance
  • Environment
  • Magazine
  • Education
Customer Support
  • Frequently Asked Questions
  • Customer Service Portal
  • Privacy Policy
  • Terms Of Use
  • Single Issues For Purchase
  • International Print
Commercial Services
  • Advertising
  • Fortune Brand Studio
  • Fortune Analytics
  • Fortune Conferences
  • Business Development
  • Group Subscriptions
About Us
  • About Us
  • Press Center
  • Work At Fortune
  • Terms And Conditions
  • Site Map
  • About Us
  • Press Center
  • Work At Fortune
  • Terms And Conditions
  • Site Map
  • Facebook icon
  • Twitter icon
  • LinkedIn icon
  • Instagram icon
  • Pinterest icon

Latest in Finance

Close to a million investors of the Trump memecoin lost a collective $3.8 billion, even as the president disclosed $636 million in earnings
CryptoCryptocurrency
Close to a million investors of the Trump memecoin lost a collective $3.8 billion, even as the president disclosed $636 million in earnings
By Marco Quiroz-GutierrezJuly 7, 2026
7 hours ago
Presidents aren’t supposed to pick winners, former White House ethics lawyer says. Trump keeps choosing Dell
PoliticsDonald Trump
Presidents aren’t supposed to pick winners, former White House ethics lawyer says. Trump keeps choosing Dell
By Mia OsmonbekovJuly 7, 2026
7 hours ago
Scott Wu, in front of a blue background, sits in a gray chair and speaks to a person out of frame.
AIProductivity
Cognition CEO says tech companies got ‘carried away’ with token leaderboards and should measure employees on output instead
By Sasha RogelbergJuly 7, 2026
8 hours ago
Commercial property insurance explained: What it covers for businesses
Personal FinanceInsurance
Commercial property insurance explained: What it covers for businesses
By Joseph HostetlerJuly 7, 2026
10 hours ago
Bill Holland gesturing
SuccessCareers
He went from working in a factory to being rich enough to retire at 32—but 3 decades later, this millionaire still works and takes public transport
By Preston ForeJuly 7, 2026
10 hours ago
What is covered by home insurance? What’s included and common exclusions explained
Personal FinanceInsurance
What is covered by home insurance? What’s included and common exclusions explained
By Joseph HostetlerJuly 7, 2026
10 hours ago

Most Popular

Ex-PepsiCo CEO Indra Nooyi worked from midnight until 5 a.m. as a receptionist to pay for her Yale degree—and she says ‘respect went up’ because of it
Success
Ex-PepsiCo CEO Indra Nooyi worked from midnight until 5 a.m. as a receptionist to pay for her Yale degree—and she says ‘respect went up’ because of it
By Preston ForeJuly 6, 2026
1 day ago
Shark Tank's Kevin O'Leary says if he were 25 today, he'd chase these two booming opportunities in the world of AI
AI
Shark Tank's Kevin O'Leary says if he were 25 today, he'd chase these two booming opportunities in the world of AI
By Marco Quiroz-GutierrezJuly 5, 2026
3 days ago
China’s birth rate just hit its lowest point since 1949—and Trip.com cofounder James Liang thinks that’s a threat to innovation
Asia
China’s birth rate just hit its lowest point since 1949—and Trip.com cofounder James Liang thinks that’s a threat to innovation
By Nicholas GordonJuly 7, 2026
19 hours ago
Current price of oil as of July 6, 2026
Personal Finance
Current price of oil as of July 6, 2026
By Joseph HostetlerJuly 6, 2026
2 days ago
Even as Elon Musk calls philanthropy ‘very hard,’ everyday Americans gave a record $617 billion—despite feeling the squeeze over the cost of living
Success
Even as Elon Musk calls philanthropy ‘very hard,’ everyday Americans gave a record $617 billion—despite feeling the squeeze over the cost of living
By Preston ForeJuly 4, 2026
4 days ago
The man who ran Bernie's campaign says Democrats are still making the same mistakes with Democratic Socialists, and they should laud Mamdani's win
Politics
The man who ran Bernie's campaign says Democrats are still making the same mistakes with Democratic Socialists, and they should laud Mamdani's win
By Catherina GioinoJuly 6, 2026
1 day ago

© 2026 Fortune Media IP Limited. All Rights Reserved. Use of this site constitutes acceptance of our Terms of Use and Privacy Policy | CA Notice at Collection and Privacy Notice | Do Not Sell/Share My Personal Information
FORTUNE is a trademark of Fortune Media IP Limited, registered in the U.S. and other countries. FORTUNE may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.