The private equity industry is facing a new challenge with investors, to avoid the hefty fees being charged by private equity firms, directly buying stakes in companies or go into co-investments.

This trend, according to industry observers, could continue.  In a survey, industry tracker Preqin found that 43 percent of investors planned to increase the money they put into co-investments wherein investors do deals  with buyout firms but pay no fees.

The survey also showed that  investors that co-invest increased to 36 percent in the first quarter of this year, from 33 percent last year, an indication of an increased  interest in investing outside traditional funds.

Financial experts, however, said that the apparent cost-saving of avoiding fees can be misleading  as investors need in-house expertise and time on the road to examine possible deals.