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Technology

Preqin launches new term intelligence tool

Preqin has announced the launch of a new tool named Term Intelligence, which introduces one of the largest searchable databases of Limited Partner Agreement (LPA) terms globally and enables enhanced private fund negotiations.

Preqin said alternative fund managers, investors, and their legal advisors can expect to benefit from greater clarity when reviewing and benchmarking LPA terms.

The tool makes it possible to see whether the terms are competitive within the market, and whether these terms, as well as the fees and expenses, are aligned with market standards to support LPA negotiations.

Preqin said it introduced Term Intelligence to help mitigate complications industry professionals face when drafting and negotiating LPA terms.

"Investment professionals on both sides of the table find the process of investing in a fund, including the legal due diligence and negotiations, to be complex and time-consuming," Preqin said.

"It has traditionally been difficult to know which LPA fees and terms meet market rate and by extension, how to distill the true cost implications across the fund's life."

Preqin said while some large law firms already have an internal database of LPA terms that they have previously worked on, they may provide limited insight into market practices because they only have access to their own firm's past records.

"Now with Term Intelligence, investors can conduct thorough pre-investment due diligence on fund terms, with the assurance that they have visibility over an objective baseline for what constitutes a market rate," Preqin said.

"Meanwhile, fund managers are able to compare LPA terms to a cross-section of funds, helping them draft competitive data-backed fund terms to secure needed capital for fundraising purposes."

Preqin head of legal insights Heather Heys said: "There remains real variation in the drafting in LPAs, for example, in how costs are allocated within the partnership. It is of key importance for investment professionals to understand what the market standard is for LPA fees and terms."

Read more: LPAPreqinLimited Partner Agreement