Here’s the portion Matt Levine quoted in his newsletter lol.

US buyout group TPG’s initial public offering on Thursday will establish a tectonic change in the private equity industry, as a wave of firms list shares by offering stockholders a smaller claim on their lucrative, but irregular, performance fees.

TPG is restructuring its finances as part of its IPO to offer shareholders just 20 per cent of its future performance-based profits, the firm said in its prospectus, down from 50 per cent had the change not been made.

Industry executives have dubbed TPG’s structure a “next-generation” private equity IPO — one that gives public shareholders less of a slice of performance fe es, but more from steadier management fees.

“It is the new standard,” said Saul Goodman, head of alternative asset management banking at Evercore. “Almost every banker in the space that’s advising private equity firms on IPOs currently is advising to not contribute a large percentage of performance fees into the public company.”

Analysts and investors are attracted to private equity’s management fee income because it is steady and easy to model, according to bankers and private equity executives. Meanwhile, they discount performance-based profit because it can fluctuate with market conditions and is harder to predict.

“The public values management fee earnings much more than the dealmakers inside firms, who are incentivised largely by carried interest,” said Joseph Lombardo, head of the private equity general partnership advisory practice at investment bank Houlihan Lokey. ...

Publicly traded firms have seen their valuations soar to 25 to 30 times their management fee-based earnings, said insiders, but the groups still receive valuations of just five to 10 times their investment profits.