Traditional private equity fee models are ending

Author: Olly Jackson | Published: 19 Jul 2018

The so-called two and 20 model, so often considered to be the standard fee charging model for private equity firms is dying, as the industry consolidates and favours mega funds. In the future, it is expected that there will be even greater fee flexibility to mitigate risk and encourage investment.

Oliver Ontiveros, partner at Warwick Capital, said it is a matter of how competitive private equity houses want to be. "Investors don’t look favourably on firms that focus on operational fees as a profit centre and pension funds are a lot more demanding than in past years," he said.

Consolidation in the private equity sector has been ongoing. L Capital and Catterton’s merger in 2016 set off a period of consolidation in the sector that is expected to continue into this year and in the last 12 months, Eurazeo merged with Idinvest and Apax France merged with EPF Partners. ...