From Fortune:

Some of the world’s biggest investors are telling private equity firms they won’t commit to new funds unless money from old ones is released. These investors also want more say in fees, co-investment opportunities, and fee discounts. They’ve gone as far as asking for a cut of the fund’s management fee or a stake in the fund manager.

In some circumstances, sovereign wealth funds have even requested that distributions be returned to them from older funds. These funds are also demanding more disclosures about the underlying assets in portfolios, and are asking for more information about their investments than ever before.

Private equity firms are facing unprecedented challenges, with buyout fundraising expected to be 30% below trend, and exit activity reaching a record low. Despite these challenges, the value of private equity valuations has remained steady.

To avoid breaching allocation guidelines, investors have liquidated private holdings and, as a result, have become more conservative. Fund managers, however, have been slow to sell fund assets. Instead, they are using leverage to release funds, and employing the strategy of net-asset-value (NAV) financing.

Despite the difficulties, private equity firms continue to find ways to navigate the challenges. Vista Equity Partners, for example, generated $18 billion in total value by cashing in on bets and signed a $1.5 billion NAV loan that earmarked $500 million for investor distributions.

With increasing pressure from investors, private equity firms are facing additional scrutiny, pushing some to lend directly to borrowers rather than going through direct lending giants. This shift in the industry highlights the evolving relationship between investors and private equity firms.



Read more: Private equity industry: $8 trillion industry faces investors pulling funds