Private equity firms that raised funds in 2025 charged the lowest average management fee rates ever recorded, at a mean rate of 1.61% of assets, according to data from Preqin. Despite fee compression, the industry raised $507 billion across 856 funds in the first three quarters of 2025, with larger funds dominating capital raising.

Managers have been consolidating in response to a difficult fundraising environment, with the 10 largest funds accounting for 46% of capital raised in 2025, up from 34.5% in 2024. Larger funds can spread fixed costs over a broader base, leading to lower fee rates but not necessarily lower fee dollars. Preqin expects fee compression to continue due to growing fund sizes.

Uncertainty remains about whether private equity fees will fall to the levels of actively managed, public equity strategies. Realizations have been muted in recent years, creating challenges for managers seeking sizable incentive fees. However, there is optimism for change in 2026, especially if there are more rate cuts from the Federal Reserve and asset valuations align.

Read more at CNBC: Private equity management fees hit new low in 2025