Private equity in a fees squeeze

Source: www.breakingviews.com is Europe's leading financial commentary service.

Investment banks aren't the only ones experiencing a fees squeeze. Private-equity firms are also feeling the pinch. Not that you'd know it by some of the headlines. The two primary ways in which they make their money have not been noticeably hit. Management fees, typically an annual charge of 1.5% on the total size of a fund, are unchanged. So is the proportion - usually 20% - of returns that managers of leveraged buyout funds get to keep of the profits generated by the investments they make.

But a closer look at a couple of recent funds shows that even some of the stars of the sector, such as Permira, are making concessions to appease investors. So, too, are firms with more mixed recent performances in some funds, such as Doughty Hanson or Hicks...