And because of private equity’s trademark 2-and-20 structure—in which the firm takes 2 percent of the investors’ money, plus 20 percent of all profits beyond a set threshold—and other assorted fees and dividends, making some money is all but guaranteed. An oft-cited 2009 paper by economists Andrew Metrick and Ayako Yasuda found that roughly two-thirds of a private equity firm’s total revenues come from fixed costs rather than from actual company profits.
