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    Oct. 1, 2026

The Fee Table Has Turned: How GPs and LPs Are Rewriting Fund Economics to Create Alignment

The “2‑and‑20” model has long served as the gravitational center of private fund economics. Yet in today’s fundraising environment – marked by heightened LP sophistication, extended fundraising timelines and fierce competition for institutional capital – the advertised fee structure and the negotiated reality are diverging more sharply, some LPs and GPs would argue, than at any point in recent PE history. This divergence is not simply a story of fee compression, but is instead a story of strategic economic sharing: GPs deploying management fees, carried interest and co‑investment rights as relationship-building tools while LPs leverage commitment size, early participation and reputational capital to extract bespoke terms. The result is a highly customized fee landscape where nearly every anchor relationship involves some form of economic accommodation and where the long-term consequences of those accommodations are only now coming into focus. In a guest article, Troutman Pepper Locke attorneys Stephanie Pindyck Costantino, Heather M. Stone and Paul A. Steffens examine the current state of GP-LP fee negotiations; the economic dynamics confronted by emerging managers; the impact of co‑investment trends on fee negotiations; and the strategic calculus that GPs and LPs must navigate as fund economics continue to evolve. See “Survey Finds PE Fundraising Momentum Building Toward 2026 Uptick” (Sep. 18, 2025).

Fifth Circuit Affirms High Standard to Modify SEC Settlements Despite Acknowledged Inequities

On August 25, 2026, the U.S. Court of Appeals for the Fifth Circuit issued a per curiam ruling (Ruling) denying a petition from a fund manager to modify the terms of an earlier settlement order with the SEC. In April 2024, the manager settled with the SEC in connection with the agency’s off-channel communications sweep conducted between 2021 and 2024. Other firms settled similar violations with the SEC in January 2025 with more lenient terms, compelling the manager and others to challenge the Commission to modify their original settlement terms on the basis of inequitable treatment. After the SEC denied the motion to modify the settlement terms in 2025, the manager challenged the matter in the Fifth Circuit. Despite sympathizing with the manager and other firms as to the inequitable settlement terms they received, the Fifth Circuit ultimately sided with the SEC across various legal grounds. Even amid the current deregulatory zeitgeist, the Ruling affirms the broad discretion afforded to the SEC in administrative proceedings; the finality of judgements and settlements entered into with sophisticated counsel; and the high bar parties face when challenging SEC settlements in court. This article summarizes the Ruling and offers practical takeaways for fund managers, with expert legal commentary. See “Attorneys in SEC GC’s Office Discuss Pending Challenges to SEC Authority and Significant Litigation” (Apr. 30, 2026).

Stale Marks, Redemption Pressure and Valuation Process Disclosures: The Emerging Shape of Private Credit Litigation

After growing to roughly $3 trillion globally in a strong economy, private credit sponsors’ disclosure, valuation and liquidity practices are now facing increased scrutiny from regulators and civil plaintiffs. Securities class actions filed over the past 12‑18 months against business development companies have converged on a narrow set of allegations: that net asset values were stale or overstated; that redemption pressure was known but undisclosed; and that described valuation and diligence processes did not match the actual processes. The SEC has signaled parallel interest in valuations, fiduciary duties, compliance programs and retail-facing products. Those developments were the subject of a Katten Muchin webinar featuring partners Kevin P. Broughel and Michael J. Diver, as well as associates Zoe Lo and Christopher T. Vazquez. This article analyzes the panelists’ assessments of the redemption, valuation and process-disclosure theories driving recent private credit litigation; the defenses that have emerged among sponsors; the SEC’s stated priorities regarding the asset class; and the measures that sponsors should consider adopting to mitigate those risks. See “Private Credit Valuations Under Pressure: Enforcement Trends, Litigation Risks and Mitigation Tactics” (May 14, 2026); and “Evolution of the Private Credit Industry and Ongoing Challenges” (Feb. 19, 2026).

Lucrative Benefits and Pervasive Risks of Earnout Clauses in Asset Manager M&A Transactions

An earnouts clause is a provision in an M&A purchase agreement that makes part of the final sale price dependent on how well the company performs after the deal closes. Earnout provisions are common in asset management M&A because of the personal nature of the business and because “assets can just walk right out the door at closing,” explained Debevoise & Plimpton partner Jillian Mulroy Wright during a program on structuring earnouts in asset manager M&A. Along with Debevoise partners Andrew G. Jamieson and Zachary H. Saltzman, and associate Marisa Demko, Wright explained how earnouts help align the interests of the parties on critical issues, including price, retention of key employees, client consents and the future success of the business. The panelists also discussed common disputes arising out of earnouts and how to mitigate the risk of such disputes. This article synthesizes their remarks. See our two-part series on asset management M&A transactions: “Negotiating Deal Terms and Addressing the Assignment of Advisory Contracts” (Apr. 27, 2021); and “Role of Target and Buyer Diligence and Tips for Areas to Scrutinize” (May 4, 2021).

ACA Study Finds Widespread, but Limited, Implementation of AI

Although it may seem that artificial intelligence (AI) is being deployed and embedded across the entire economy, uptake by financial services firms has been modest. “While most firms have begun to engage with AI, relatively few have translated that engagement into structured, scalable deployment,” according to an ACA Group report (Report). Most firms in the study are using AI to some extent, more often in compliance workflows than in operations. This article synthesizes the key findings from the Report and the insights from a related presentation by ACA Group on agentic AI, AI-related risks and developing robust AI governance. See our two-part series “Safeguarding Proprietary Fund Data and Intellectual Property When Using Generative AI”: Part One (Oct. 19, 2023); and Part Two (Nov. 2, 2023).

Simpson Thacher Adds Pair of Partners With Secondaries and Investment Funds Expertise

Zhiyan Cao and Stephanie Epstein Srulowitz have joined Simpson Thacher as partners in its New York office. Cao’s expertise is centered in secondaries transactions, while Srulowitz’s practice focuses on fund formation and fundraising. For commentary from Srulowitz, see our two-part series: “Practical Issues GPs Need to Consider Before Offering Co‑Investments” (Apr. 12, 2022); and “Potential Conflicts of Interest From Entering, Holding and Exiting Co‑Investments” (Apr. 26, 2022).

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