Selling Private Equity Fees

Friday June 23, 2023


We examine the sale of General Partner (GP) cash flow claims by Private Equity (PE) firms, termed GP stakes, and how these sales relate to agency frictions with fund investors. PE firms with better fundraising and performance records tend to sell GP stakes, mostly to other PE firms. Seller PE firms’ Assets Under Management, income, and scope of fund strategies subsequently increase, while fund performance does not deteriorate. Sellers invest more in their funds, increase employment, and make investor-friendly fund distributions. Our results suggest the reduced “skin-in-the-game” from stake sales does not exacerbate agency frictions between sellers and fund investors.


Minmo Ghang, Cornell University, Johnson School of Business
Blake Jackson, University of Florida, Warrington College of Business