Warburg Brushes Off Hurdle Question

Nov 20 2014 | 11:19am ET

Warburg Pincus isn’t worried that clients feel they are getting a raw deal without a performance-fee hurdle, a top executive said this week.

Speaking at the SuperInvestor conference in Paris, Martin Dunnett said, “If you’re providing the performance at the levels that we are, it’s not an issue at all.”

The issue of fee hurdles—minimum performance levels below which firms do not charge incentive fees—was sparked once again earlier this month by a report that Kohlberg Kravis Roberts had assented to one on its new European fund. KKR’s last such fund underperformed peers, a problem that Dunnett, a London-based managing director at Warburg, does not consider a problem at his firm.

What’s more, Dunnett said, Warburg investors are getting a deal, anyway, as the firm does not charge monitoring or transaction fees, as do others.

“The sacrifice we give up on those is far greater than the sacrifice on the hurdle,” he said.

“If you look at the way the carry structure works within the firm, when investors see that, they are happy we don’t have a hurdle. It wouldn’t work. The carry structure is different to every other firm in the industry and it rewards people for the value that they create.”

Dunnett said that only one of the 270 investors in Warburg’s latest flagship fund, which closed in May with $11.2 billion, expressed concern about the lack of a hurdle.


In Depth

PAAMCO: Will Inflation Deflate the Asset Bubble?

Jan 30 2018 | 9:49pm ET

As the U.S. shifts from monetary stimulus to fiscal stimulus, market pricing should...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Boost Hedge Fund Marketing ROI By Raising Your ROO

Feb 14 2018 | 9:57pm ET

Tasked with delivering returns on client capital, a common dilemma for many alternative...