The hefty fees earned by the world’s biggest private equity groups will have to fall if they are to raise more money from cash-strapped investors, the chief investment officer of SVG Advisers warned on Thursday.

“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 $4bn or $5bn and they still want to charge 2 per cent,” said Solomon Owayda, who oversees €4.4bn (£3.5bn) of private equity investments at SVG.

His comments at a conference in London are among the most explicit admissions by an industry insider that private equity fees – earning big buy-out groups hundreds of millions of dollars a year – seem unacceptably high.

SVG Advisers is a subsidiary of SVG Capital, the listed group that is the biggest investor in Permira, one of Europe’s biggest buy-out houses.

Private equity groups – which use a mixture of investor capital and bank debt to buy companies – face a sharp drop in returns since the credit crisis caused big write-offs on their portfolio and made it harder to borrow money for future deals.

Mr Owayda said the “2 and 20” model, whereby private equity groups charge an annual fee of 2 per cent of funds raised and take 20 per cent of any profits – was a relic from a time when most buy-out funds were much smaller.

“For some reason that 2 per cent stuck even when somebody is raising $10bn,” he said. Hedge funds, which use a similar 2 and 20 model, have already come under pressure to cut fees after the dire returns suffered by their industry this year.

As private equity returns fall and more investors find themselves overallocated to the industry after steep falls in equity and fixed income markets, fees could come under pressure in a harsher fundraising climate.

Elaine Small, partner at Paul Capital, a leading secondaries private equity investor, said: “To the extent that general partners want to get a fund raised, they may need to renegotiate . . . the terms for fees.”