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The boom in the private equity fund industry has gone into overdrive. New records are being set on almost a weekly basis. This is a golden age for private equity firms: soaring valuations and a frenzy of takeover deals, with the prospect of more to come.

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Co-investing has gone on for a long time but currently appears to be growing very rapidly. It may very well be changing the industry – but, obviously, there is no role for independent governance in a co-investment because the LPs are effectively in the driving seat. However platforms are being built to allow smaller LPs to get in on co-investment opportunities as a group. In these situations some form of independent governance would be a good idea.

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LPACs might, or might not, provide serious oversight of the GP but what is equally important is who is invited to be on the LPAC in the first place. Research that IFI Global conducted a couple of years ago into LPAC selection suggested that size is easily the most popular criterion for selection to the committee. Most GPs surveyed select LPs simply by size of their allocation to the fund. If an LP’s allocation constitutes at least 10% of the fund it is generally thought they have a right to be on the LPAC.

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Following on from last month’s review of fund governance in Cayman The NED continues its series examining fund governance and directors by jurisdiction with a look at Ireland. (Next month, Luxembourg.)

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The US has overtaken the EU as the primary export market UK financial services. Approximately 34% of exports by UK banks and finance companies went to US in 2020, according to research by the  TheCityUK, compared to 30% to the EU.
 

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