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Limited partners of the world unite, you have nothing to lose but your ... gains?

It's payback time for institutional investors in private equity. At least that's how the conventional wisdom goes. After private equity firms had essentially taken a two-year sabbatical during the financial crisis while using up management fees, their constituents -- pension funds, endowments and the like -- are understandably feeling, well, Scrooge-like. Distributions pretty much dried up when dealmaking stopped, and valuations were dragged down by sinking stock markets. With little cash to spare, not a few LPs endured haircuts in ugly markets.

But what have LPs got to show by way of concessions from their general partners? Not a whole lot, yet. During one of the most difficult fundraising cycles ever for private equity, the changes thus far appear to be more qualitative in the eyes of LPs.

Granted, the timing is unfortunate. Not many funds have launched road shows this year, and funds that got completed were generally those that had broad appeal. LPs argue that progress has been made. "It's moving," as one industry practitioner insists. But whether it's moving forward enough or going sideways, it's hard to say.

For sure, the liquidity crunch has eased more significantly for LPs than at any point since 2007. They can thank freebasing credit markets (see articles on leverage, pages 48 and 50) for that. For the first time since the crisis, distributions have exceeded capital calls. And everyone, from the midmarket to megamarket funds, is reflecting improved valuations in portfolios.

There's the rub. Markets are fickle, and so are investors in private equity. If the economy bounces back in 2011 and distributions pile up again, general partners could steal a march by dangling short-term gains to appease LPs before they have a chance to wield leverage fully.

When GPs start launching a charm offensive, LPs should bear in mind they have strength in numbers. With a huge overhang of capital -- $450 billion, by most estimates -- LPs are at or nearing target allocations. New commitments will flow only to select targets. Although liquidity has improved, 2011 could be the toughest year yet for fundraising as many private equity funds that have postponed efforts all crowd back in. Very simply, the new normal is: less capital to go around.

What to do if you're an LP? Here's a handy questionnaire to help keep the GP charm in check:

Have you pressed the right buttons?

There are different hot-button issues for different funds. Some GPs obviously have more problem companies than others. Even with recent improvements, chances remain there are still plenty of dogs lurking in the fund's portfolio.

Ultimately, you're looking at a pretty mediocre vintage. If you invested in a $1 billion fund in late 2007 or early 2008, and the fund hasn't been investing for two, maybe three, years while using up management fees, you'll wind up having a huge gap between net and gross returns.

Are you spending more time in talks?

If you like slow food, slow capital is in vogue, too. Take your time unless you absolutely need to invest quickly in a popular fund to gain access. As this last boom cycle has shown, today's top-quartile performers may be tomorrow's also-rans. Leave no stone unturned and ensure the manager can execute on strategy, while making meaningful changes in transparency and communication.

Are you getting sufficient discounts on fees?

Take your cue from the Oregon State Treasury, which stood its ground on the fee-sharing arrangement with Blackstone Group LP. Blackstone earlier offered LPs a 65% share of transaction fees arising from acquisitions, versus the historical 50-50 ratio. Investing in Blackstone for the first time, Oregon squeezed an 80-20 split in return for committing $200 million to the firm's pending Fund VI, now said to be more than $14 billion.

But don't compromise too quickly on management fees, as Oregon did. In fact, if GPs insist on charging transaction fees, why not ask for 100%? Advent International Corp., Francisco Partners Management LLC and other funds evidently agreed to it. It's cash that could go to generate value in portfolio companies anyway.

Relations with GPs don't have to be adversarial, but that oft-repeated mantra -- alignment of interest -- has to be a mutual agreement, by definition. Play the numbers card. The deck is still stacked in your favor.