Private equity gets a bigger slice of the pie

NEW YORK -- Private equity's titans may be getting even richer.

Premium carried interest was a hot topic at the annual private equity conference hosted by industry publication Buyouts this week.

Carried interest refers to the share private equity firms take when the funds they manage make a profit. Generally in the range of 20 percent, some funds are taking home a cut as high as 30 percent, according to industry professionals.

Private equity firms with enviable track records can afford to be demanding these days. Investors eager to not miss out on the private equity train have been knocking on the industry's door, and fundraising is at an all-time high.

Private equity funds raised $88 billion in the first quarter worldwide, with half of those commitments going to buyout funds, according to London-based research house Private Equity Intelligence. The group predicts private equity funds will raise $450 to $500 billion this year.

At the two-day conference in New York, several limited partners - which are mainly institutional investors who pour money into private equity funds - said they're willing to pay higher carried interest as long as fund mangers are able to deliver returns.

Private equity may be basking in its riches, but success can bring its own problems.

At the two-day conference, industry experts expressed concern that potential tax changes to carried interest could put a damper on the market.

The Senate Finance Committee is said to be considering moves to tax these gains as regular income rather than as capital gains. Such a move could hike the tax rate on carried interest to as high as 35 percent, versus the current 15 percent.