A new and more chastened private equity industry has emerged from the crisis, one which has been forced to go cap in hand – and often with its tail between its legs – to the people it used to take for granted: investors.
This week has seen the clearest sign yet that the balance of power has swung sharply from general partners (buyout firms) to limited partners (the investors who give them money to play with).
The shift in the balance of power should not be surprising. In good years, limited partners focused less on fees and fund structures, so long as the returns rolled in. Now that buyout firms are struggling to spend existing funds (there have only been $17bn of buyouts in Europe this year), struggling to exit existing investments, and straining to raise new funds, they are having to be nicer and more flexible to their investors.
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