The research by KPMG and the Manchester Business School revealed private equity firms are failing to manage their investment portfolios properly because they do not have the right people to respond when companies hit problems.

Oliver Tant, head of private equity at KPMG, said: 'Too often PE houses find out things are going wrong too late and then are unable to do anything about it.'

The report highlighted the importance of maintaining relevant communication channels between private equity houses and investee companies if the monitoring function was to be effective.

Tant said: 'The key issues for PE houses in managing their portfolios are the communication channels available for them to understand what's really going on in the investee companies and then having the right skills on tap to act quickly.'