- Preqin data shows 2025 buyout funds asked for a record-low mean management fee of about 1.61%, well below the legacy 2% norm.
- Fundraising stayed weak through Q3 2025 at roughly $507B (~73% of 2024), reflecting muted exits and macro uncertainty.
- Fee compression is driven by mega-funds, with the 10 largest capturing ~46% of 2025 capital raised as smaller funds often remain closer to 2%.
- Lower headline fees may not fully reduce LP all-in costs because discounts, side letters, and offsets make net fees less transparent and potentially stickier.
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The most recent data from Preqin confirms that private equity management fees hit their lowest average level in 2025. Among funds raised in 2025, the mean buyout fund management fee is approximately 1.61% of committed capital—well under the traditional 2% fee structure that has long characterized the industry. This decline is largely driven by two structural pressures: a difficult fundraising environment, and the growing dominance of very large funds that can operate efficiently at lower percentage rates due to scale.
Despite the lowered fees, capital raising in PE has not rebounded strongly. In the first three quarters of 2025, $507 billion was raised globally, putting total fundraising on course to come in below 2024. That amount reflects investors’ concerns over uncertain exit prospects and macroeconomic headwinds.
Large, established firms are benefiting disproportionately. Nearly 46% of PE capital raised in 2025 is going to the 10 largest funds, up from about 34.5% in 2024. These mega-funds are able to swallow the margin hit in percentage terms because the absolute dollar value of fees is large, and they benefit from economies of scale—lower fixed costs per dollar of capital under management. Smaller firms, by contrast, must often stick closer to 2% to maintain coverage of their operational costs.
On the flipside, lowered headline fees do not necessarily translate directly into lower net fees paid by LPs. Side letters, negotiated terms, fee offsets, and preferred equity arrangements can alter actual cost. Preqin reports that while headline fees are falling, actual fees paid by many LPs—particularly those with less negotiating power—may not decline as much, due to diluted discounts and fewer favorable bespoke deal terms.
Strategic implications for GPs include tighter margins for smaller or newer firms, increased pressure to scale, sharpen fundraising propositions (including fund structure, performance track record, and LP relationships), and enhanced transparency. For LPs, the trends suggest improved bargaining power, more tools to push for favorable fees, but also risks around soliciting true cost disclosures and comparing apples to apples across fund vintages.
Open questions include: how far headline fees will decline (whether they head toward public equities levels around ~0.5-1%), when exit activity will pick up enough to lift carried interest streams, and whether regulatory or investor pressure will lead to standardization in net fee disclosures.
Supporting Notes
- The headline mean management fee for buyout funds raised in 2025 is 1.61%, according to data through June from Preqin.
- Legacy 2% fees remain common among smaller or middle-market funds, while larger funds (>$1 billion) are the primary source of drag on the average fee.
- Total capital raised in Q1–Q3 2025 is US$507 billion, about 73% of what was raised in full-year 2024.
- Nearly 46% of capital raised in 2025 was captured by the 10 largest funds, up from about 34.5% in 2024.
- Exit activity remains subdued, which constrains carried interest realizations and pressures GPs to offer management fee breaks and discounts.
- Despite lower headline fees, the actual fees paid by LPs may be mitigated by fewer discounts or favorable side letters, especially for smaller LPs.