Private equity firm Bain Capital is proposing temporarily waiving management fees for investors in its private equity funds, three sources familiar with the matter said.
Under the proposal, which was put to investors last week, Bain would recoup the fees when investments in the funds were realized, the sources said.
The waiver would probably only apply to the older of its private equity funds, the sources said. Those have little unspent capital remaining and need to conserve that to make follow-on investments in current portfolio companies.
Private equity firms typically charge management fees of around 2 percent on a quarterly basis. Bain would have the option each quarter to defer the fees, one of the sources said.
Bain declined comment.
Private equity firms have been struggling to keep portfolio companies healthy during the economic crisis, while having few opportunities to recoup money by selling their investments.
Meanwhile investors in private equity funds, known as limited partners, are less willing to commit more funds to the asset class.
Carlyle Group [CYL.UL] co-founder David Rubenstein said at a recent conference that limited partners will have more power to dictate fees and fund sizes, and predicted that for the next few years, they will hold the balance of power.