Introduction
PJT Partners' 2024 annual report states that its placement fees are generally recognized as revenue when an investor subscribes to a client's fund, yet paid by the client over time with interest, for example over three to four years. That disclosure captures how private capital advisory gets paid: fees follow an outcome rather than time spent, the party signing the engagement letter is often not the one whose money bears the cost, and cash arrives long after the work.
Revenue comes in three forms: success fees on LP-led and GP-led secondaries, placement fees on capital raised, and advisory fees on GP stake sales and fund financings. The mechanics resemble the retainer and success fee model of M&A; what differs is who stands behind the invoice, and each difference creates its own conflict.
Secondaries Success Fees: Who Pays on LP-Led and GP-Led Deals
On a secondary, most of the advisor's pay arrives at closing; what differs between LP-led and GP-led deals is the engaging party and the economic payer whose proceeds absorb the fee.
LP-Led Sales: The Seller Hires and Pays
In an LP-led sale the selling limited partner engages and pays the advisor, and most of the fee depends on interests actually transferring. Fee terms sit in the engagement letter and are rarely published, but the scale of the work often is. When New York City's five pension systems completed a private equity secondary sale of about $5 billion in May 2025, the Comptroller's office reported more than 80 potential bidders for about 75 managers, over 125 funds, and 450 commitments, with Evercore as transaction advisor.
- Success Fee
A fee payable only when a defined outcome occurs, typically the closing of a transaction or an investor's commitment to a fund. Because it depends on completion, a success fee gives the advisor a direct financial interest in the deal going ahead, which is the root of most advisory conflicts.
For an LP seller, that structure mostly aligns interests. The friction sits at the margins: a mosaic that leaves a tail unsold pays the advisor only on what transferred, and a seller weighing a weak bid on a hard-to-sell fund is advised by a firm paid only if the answer is yes.
GP-Led Deals: The GP Hires, Many Parties Pay
A continuation vehicle separates the roles. The general partner engages the advisor, but costs are shared among the existing fund, the new vehicle, selling and rolling LPs, the lead buyer, and the GP. The Institutional Limited Partners Association (ILPA) principle that costs follow benefit is summarized in the comparison with sponsors coverage and M&A; the practice behind it appears in ILPA's draft continuation vehicle guidance, released for comment in June 2026, which describes these cost allocation conventions:
| Cost | Typically borne by, per the June 2026 draft |
|---|---|
| Advisor fees | The existing fund, whether or not the deal completes |
| Transaction costs, including transfer taxes | Split equally between existing fund and CV, unless negotiated |
| CV formation costs | CV investors including rolling LPs, excluding the lead; capped, converging on about 0.75% to 1% |
| Lead investor legal costs | The CV, subject to a negotiated cap |
Because advisor fees fall on the fund even if the deal fails, the draft wants LPs told when an advisor is appointed. ILPA's 2023 continuation fund guidance adds that selling LPs should bear their proportionate share of sale costs, that the GP should share costs when it gains extra fee revenue or a stapled commitment, and that a fixed advisory fee can load sellers with a disproportionate share if fewer LPs sell than expected.
Placement Fees: Earned at Commitment, Collected Over Years
A placement fee is earned as investors commit, so an agent's income follows the sequence of closes in a fundraise. Collecting over several years with interest means the agent is effectively extending credit to its client, and PJT flags the risk of not collecting fees for work already done. How agents win these mandates is covered in what placement agents do and when GPs hire them.
Who bears the fee is a contract question for the LPA, with a well-known benchmark. The ILPA Principles 3.0 recommend disclosing the GP's agent arrangements in due diligence materials, charging placement agent fees to the manager and placement expenses to the fund, fully offsetting any fees charged to the fund against the management fee, and having the LPAC review placement expenses.
- Management Fee Offset
An LPA provision that reduces the management fee LPs pay by some or all of certain amounts the manager receives or the fund bears, such as portfolio company transaction fees or placement fees charged to the fund. A full offset reduces the fee dollar for dollar; a partial offset splits the amount between LPs and manager.
The offset lets a fund pay the invoice while the manager bears the cost. If a fund pays a $12 million placement fee under a full offset, its LPs' management fees fall by $12 million, so the fund has only advanced the cash; under a 50% offset, LPs bear $6 million. The percentage is negotiated alongside the fee base and rate covered in management fees, carried interest, and the distribution waterfall.
GP Stakes and Fund Finance: Advisory Fees Outside the Fund
A GP stake sale transfers part of the management company, so the manager or its owners pay the advisor, typically on completion, and no fund LP stands in the payment chain. Fund finance advisory, arranging a NAV facility, preferred equity, or GP-level debt from other lenders, is paid by the borrower. When that is the fund, LPs bear the cost indirectly, one reason ILPA's 2024 guidance asks GPs to disclose a NAV facility's rationale, key terms, and conflict handling to all LPs, as NAV lending in practice explains.
How PCA Mandates Are Won
A pitch usually leans on three advantages:
- Relationships: the LPs a placement team calls every fund cycle and the GPs it has raised capital for, a network that carries straight into secondaries mandates.
- Pricing data: an advisor that runs many LP sales sees bids across hundreds of funds, and a credible fund-by-fund view of where a portfolio will clear is the core of a sell-side pitch.
- Buyer access and execution record: lead-capable buyers for large deals, and a history of closing with consents and elections intact.
The published market reviews are the public face of that data and double as marketing. For a continuation vehicle, a GP can run a competitive pitch much like an ECM bake-off, but the winner must also survive LPAC review of its role and fee, and the June 2026 draft asks GPs to disclose advisor success fees for that review.
The Conflicts Built Into PCA Economics
Most conflicts in PCA economics come from a gap between three parties: the hiring party, the paying party, and the investors whose value is at stake.
Paid on Completion, Hired by the GP
In a GP-led, a success fee creates a double tilt: the advisor is chosen by a GP that keeps the asset and can reset fees and carry, and is paid when the deal happens, while the price it helps set decides what selling LPs receive. ILPA's answer is procedural. The June 2026 draft wants advisor success fees and other GP incentives reviewed by the LPAC, and suggests offering the LPAC its own independent financial advisor, at the existing fund's expense. Conflicts of interest, fairness opinions, and the ILPA guidance covers the full set of protections.
Staples: One Firm, Two Mandates
A staple links a CV or tender offer to the lead buyer's commitment to the GP's next fund, value that goes to the GP rather than the selling LPs. The June 2026 draft tells GPs not to favor bids that advance their own interests and to give LPs an anonymized summary of final-round bids. The conflict sharpens when the advisor is also raising that next fund and the stapled commitment could count toward its placement fee, exactly the fee incentive ILPA wants disclosed; the article on stapled secondaries works through the economics.
Advising While the Bank Lends
Universal banks carry this conflict and independents sell against it. Evercore's 2024 annual report describes it as an independent firm without commercial banking, founded on the belief that there was room for a bank free of the potential conflicts inside large, multi-product, capital-intensive institutions. A bank that would also lend on the facility it recommends earns lending economics on one answer, the problem behind the toolkit article's lender-conflict warning.
Because the guidance is a draft and every allocation above is negotiated, an advisor's own fee is one of the terms it must defend in front of an LPAC. That makes fee design part of the advisory work itself: a structure the LPAC can see is fair to sellers and rolling LPs strengthens the case that the price was fair too.
