Private equity management fees that allow large funds to earn hundreds of millions of dollars in addition to performance fees must be reformed, according to Solomon Owayda, chief investment officer of SVG Advisers, the private equity fund management arm of London-listed private equity firm SVG Capital.

Speaking at a Reuters forum, Mr Owayda questioned the need for funds to charge the traditional 2 per cent management fee on top of the performance-related carried interest system.

The carried interest system allows private equity firms to take 20 per cent of returns for investing only 1 or 2 per cent of their own money.

"I am going to have a hard time when someone is trying to raise their third or fourth fund and it's going to be $4 or $5 billion and they still want to charge 2 per cent - I would have a hard time with that," Mr Owadya said.

He said 2 per cent was an acceptable management fee level 20 years ago when $500 million was considered a mega-fund and the $10 million allowed for overheads such as salaries, offices and travel.

"For some reason that 2 per cent stuck even when somebody is raising $10 billion. Why on earth would anybody need 2 per cent on $10 billion when they are raising fund four?" he added.