The private equity (PE) industry has changed its contours significantly in the past few years, including the face of its Limited Partners and the fee structure, according to David M Rubenstein, co-founder and co-CEO of The Carlyle Group.
Speaking at a television programme 'Wall Street Week' on Sunday, the PE industry veteran said: “The industry has changed more in the four or five years since the crisis than in the previous 45 years.” He was referring to the global financial crisis which hit during 2008.
According to him, the industry changed most in recent decades as its investor base evolved and clients now demand more fee concessions.
He pointed out that public pension plans have been the biggest investors in the industry from 1970s to early 2000s but today sovereign wealth funds are overtaking pension plans in allocating money to the firms.
He noted that large investors and those who commit early to funds are also able to extract discounts on the fee charged by the PE firms. In the past, all investors were charged a uniform percentage of around 2 per cent of their committed money.
Rubenstein added that big clients are increasingly seeking separately managed co-investment funds with the PE firms instead of solely committing money to one big pool with other investors.
Rubenstein, who co-founded Carlyle, one of the largest PE firms globally, in 1987, also shared his perspective on expanding the source of money for the PE firms. He said regulations of fund structures should change to allow people who have a net worth of under $1 million or those earning less than $200,000 a year, to put some of their retirement savings in private equity vehicles.