Private Equity's Strategic Shift: Scale, Fee Pressure Reshape Industry

What's New

Bain & Company's 2025 Global Private Equity Report reveals the industry is facing unprecedented structural changes demanding a strategic overhaul. According to the report, PE firms must adapt to compressed margins, more difficult fundraising, increasing importance of scale, and the rise of strategic M&A to remain competitive over the next decade.

Why It Matters

These shifts mark a fundamental turning point for an industry that previously thrived by "riding the wave" of low interest rates and multiple expansion. With the end of that era, PE firms must now articulate clear differentiation and value creation strategies to attract capital and talent while managing increasing competition for deals.

Big Picture Drivers

• Fees are experiencing significant downward pressure, with average net management fees cut by as much as half since the global financial crisis.

• Capital sources are shifting dramatically, with sovereign wealth funds and private wealth expected to contribute 60% of future AUM growth.

• Scale advantages are becoming more pronounced, offering larger firms benefits in operational efficiency, investment capabilities, and institutional stability.

• M&A activity has accelerated within alternatives, with over 180 transactions since 2021 as firms seek growth, new capabilities, and distribution channels.

• Performance now depends more on operational improvements rather than financial engineering, requiring significant new capabilities and investments.

By The Numbers

• 50%: Potential reduction in average net management fees since the global financial crisis

• 60%: Projected contribution of sovereign wealth funds and private wealth to alternatives AUM growth

• $17 trillion: Projected sovereign wealth fund capital by 2035, growing at 11% annually

• 180+: Strategic M&A transactions in alternatives since 2021

• 16%: Current allocation of individual investor wealth to alternatives (versus 50% of global capital)

Key Trends to Watch

• Retail convergence will accelerate as traditional wealth managers and alternatives firms compete to create semiliquid products with lower minimums for individual investors.

• Sovereign partnerships will reshape capital flows as SWFs grow beyond passive investment to become sophisticated partners focused on the largest funds.

• Differentiation imperatives will drive firms to clearly articulate their unique value proposition and invest in capabilities that demonstrate repeatable alpha generation.

• Cost management will become a board-level concern for PE firms as they balance increasing capability investments against declining fee revenues.

The Wrap

The firms poised to lead have defined clear ambitions for where they want to compete and developed actionable strategies to get there. This includes making tough choices about growth targets, differentiation strategies, and resource allocation while managing increasing complexity and preserving what makes them special.