Private equity firms that raised funds in 2025 recorded the lowest average management fee rates ever, continuing a multiyear decline.
Fee Rate Analysis
Buyout funds from the 2025 vintage charged investors an average rate of 1.61% of assets, according to Preqin data published in a December report. This rate is notably below the traditional 2% management fee historically associated with the private equity industry.
Contributing Factors
This trend of fee compression is attributed to several factors:
- Fundraising Environment: The industry has experienced challenging fundraising conditions, leading many managers to offer fee discounts to secure investment commitments.
- Industry Consolidation: Capital is increasingly consolidating towards larger funds. During the first three quarters of 2025, the industry raised $507 billion across 856 funds. Nearly 46% of this capital was raised by the 10 largest funds, an increase from 34.5% in 2024, according to PitchBook.
- Economies of Scale: Larger funds, those seeking over $1 billion, have contributed to the reduction in the mean fee rate. These funds can distribute fixed costs, such as compensation, compliance, and technology, across a broader asset base, enabling them to charge lower percentage fees. In contrast, middle-market and newer, smaller firms continue to charge rates closer to 2%.
Outlook
Preqin analyst Brigid Connor stated in the report that private equity fee compression is expected to continue in the near-to-medium term, with growing fund sizes identified as the primary driver of this trend.