Salient to Investors:

Large investors are increasingly seeking separately managed accounts with better terms than the others.

Regulators are concerned that a manager may evaluate the same investment for a pooled fund and a separately managed account but protect the favored large investor from due diligence costs if the deal falls through. 

Regulators are examining whether managers are giving lawyers and bankers business related to their funds in exchange for fee discounts for the management company.

Private-equity firms charge annual management fees of 1.5 percent to 2 percent of committed funds and keep 15 percent to 20 percent of profit from investments. When a buyout fund exits a holding, investors often get their investment back first, plus a certain percentage of the profits, after which the fund manager can begin collecting carried interest, which is taxed at 15 percent rate for capital gains, rather than 35 percent top rate for regular income.

Read the full article at http://www.bloomberg.com/news/2012-09-21/sec-said-to-scrutinize-private-equity-on-share-of-payout.html