Private equity fee models are changing as the industry
consolidates and favours mega funds. It's envisaged that there
will be even greater fee flexibility to mitigate risk and
encourage investment. The two and 20 model – a two
percent management fee and a 20% performance fee based on
returns – is being slowly phased out with many firms
charging a performance fee as low as 15% for riskier markets.
Consolidation in the sector has also influenced this change.
M&A activity in private equity last year was more than
double the levels seen in 2015, according to a Triago report.
This means firms can raise even bigger funds with a more
performance based structure.
Eyes on the prize Increasing public desire to protect
national interests is encouraging US and EU governments...