Permira, the private equity firm, is allowing its cash-strapped investors to cut payments to its fund by as much as 40 per cent.

Last month, The Times disclosed that SVG Capital, a listed fund of funds whose primary investment is in Permira, had asked to cut back on its promised financial commitments to the private equity house.

Yesterday, SVG said in an announcement to the London Stock Exchange that all investors to Permira would be allowed to cap their commitments to the Permira IV fund at 60 per cent of the amount that they agreed to contribute when the fund was raised in 2006.

Permira estimates that it could lose as much as £1.6 billion from its €11 billion (£9.5 billion) current fund. However, because it is already 52 per cent invested, the decision will cut Permira's spending power for the next four years by as much as a third.

The terms for taking up the cap are punitive. SVG said in its statement that investors who take up the offer would have to accept a 25 per cent reduction in their entitlement to distributions from the fund. They would also have to pay management fees based on their original commitments.

Permira's fees are believed to be close to the standard private equity rates of 2 per cent of capital, plus 20 per cent of profits above a certain level.

SVG Capital said yesterday that it was reviewing the terms of the offer and would make an announcement in due course.

Permira has made the offer to all of its investors, but it is believed that SVG Capital is one of the most cash-strapped. The fund committed itself to its contributions when the buyout bubble was at its height and investors were regularly over-committing themselves, believing that they could sell-on investments at a later stage.

Last month, SVG said that it had commitments of £1.25 billion to pay to Permira and others, but only £1 billion of cash and bank facilities available to meet them.

Concern is growing that the private equity industry as a whole is facing a funding crisis as some of the biggest investors, including Calpers, the Californian pension fund, Harvard and Yale, the American universities, and Wellcome Trust, the British medical charity, try to cut back on their allocations to the asset class.

The future of the private equity business model has been a subject of debate this year as cheap debt to finance takeovers has dried up.

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