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Private Equity Fees Drop to Record Low

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February 20, 2014

Private equity management fees are dropping to record lows, according to Financial News citing figures from Preqin. Based on an analysis of firms raising funds in 2013 and those still seeking capital, management fees are averaging out at 1.9% of the fund’s total value. It is the lowest figure since records began in 2005, says the report.

 

Management fees have historically been about 2%.  Another change is that transaction fees, which buyout firms charge portfolio companies, are increasingly paid back into the fund rather than to the fund manager. An industry insider was quoted saying that the trend of fees coming down is here to stay.

 

Managed accounts are also becoming more common. Managed accounts totals climbed to a record high of USD 20 billion for 73 accounts in 2013, compared with USD 17 billion for 61 accounts in 2012 and just USD 1 billion for eight accounts in 2003.

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