Hedge funds vs. VC…

One of my recent posts compared the some of the differences between the fee structure of Private Equity and Venture Capital. As I read about the melt down in certain leveraged hedge funds, I wonder if there is the equavalent of a LP Claw Back?

With Venture Capital there are often certain provisions that allow the Limited Partners to ‘claw back’ some of the carried interest and fees if it turns out that they exceed the agreed to terms.

When a position is closed (i.e. company/stock/debt is sold), calculating realized gains is simple and distributing the carry to the GPs fairly straightforward. But if you simply mark to market, can/do you distribute the carry? Is there a claw back? What happens when the markets seize?


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