Limited partners are gaining more leverage in private equity fundraising as a slower deal and capital-raising environment forces managers to compete harder on terms, according to recent reporting that points to fee cuts, zero-fee co-investments and tighter alignment demands.
Bloomberg reported that LPs are increasingly expecting general partners to contribute more of their own capital when launching new funds and are pressing for concessions such as zero-fee co-investments. Financial Advisor Magazine, citing the same reporting, said average management fees across buyout funds fell to 1.6% by mid-last year, down from the traditional 2% and the lowest level ever recorded.
That marks a meaningful shift in bargaining power. Fees have long been one of the clearest expressions of LP appetite for better economics, but the latest round of fundraising pressure appears to be widening the negotiation beyond headline economics and into governance, transparency and access.
ION Analytics / Mergermarket reported that many LPs still see access to top private equity managers, but that preserving influence has become harder as fund sizes rise and the biggest firms continue to attract strong demand. In practice, that means LPs may not be able to dictate which managers they back, but they can often push harder on the terms attached to that capital.
Those terms are showing up in a range of ways. Bloomberg said zero-fee co-investments are among the concessions LPs now expect more often, reflecting a market where anchor capital is valuable enough to justify giving investors a cheaper path into deals. PEI archive coverage has pointed to the same dynamic before: as fundraising competition intensifies, managers sweeten raises with fee discounts and co-invest rights.
The pressure is not limited to flagship fundraising. Private Equity Wire reported rising LP concerns around continuation vehicle processes, where transparency on incentives, bidding dynamics and potential conflicts has become a key issue. That suggests LPs are applying their leverage not only to new funds, but also to complex portfolio transactions where alignment can be harder to assess.
The backdrop is a softer capital-raising market, even if the slowdown is uneven. Reuters reported on 21 April that Sweden’s EQT raised $15.6 billion for its largest Asian private equity fund, underscoring that top-tier managers can still attract large commitments. But the same broader environment includes weaker fundraising across parts of Asia-Pacific, reinforcing the notion that managers are operating in a more competitive market for capital.
That competition is not confined to buyout funds. Reuters also reported on growing stress in private credit, where fund shares have traded at steep discounts and fundraising momentum has cooled in some corners of the market. While private credit is a separate segment, the message for alternatives investors is similar: capital is more selective, liquidity is more valued and managers face greater scrutiny over pricing and structure.
The broader alternatives landscape is also evolving as retail access expands. The Globe and Mail recently reported that Wealthsimple is shifting customers from a private equity fund into a mixed private market fund, raising questions about product design and investor risk. Stanford GSB, in an explainer on private equity, notes that the asset class has historically been illiquid and largely inaccessible to retail investors — a reminder of why economics, transparency and alignment matter so much to LPs in the first place.
There is still a clear divide between the firms that can command scale and the broader market that must work harder for commitments. Reuters’ EQT report shows elite managers can still close very large funds. But the wider fundraising slowdown is giving LPs more room to negotiate, and they are using it.
For PE managers, that means the competitive question is no longer just how much capital they can raise. It is how much they must give up to get it.
The result is a buyer’s market for LP capital: lower management fees, zero-fee co-investments and more forceful governance demands are emerging as the clearest signs that limited partners are winning the upper hand.
