Sunday, December 7, 2008

Private equity rubicon

By Martin Arnold in London and Henny Sender in New York
Published: December 5 2008 20:26 | Last updated: December 5 2008 20:26

FT Weekend

Europe’s biggest buy-out group, Permira, has offered to hand back €1.5bn ($1.9bn) of unused capital to investors, the first time a private equity group of its size has broken the iron-clad commitments that tie backers into a fund for at least 10 years.

Permira has offered its investors, including big US pension funds Calpers, Calstrs and Washington State, the chance to cut their total commitments as much as 40 per cent.

In return, investors must forgo a quarter of any eventual profits from the fund and continue paying management fees on their original commitment size.

Other big private equity groups in the US and Europe are expected to make similar moves, analysts said on Friday, in a sign of the pressures facing investors amid mounting global financial turmoil.

“This is the first test of how fractured the investor community is,” said the head of private equity at one major bank.

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