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Many buyout firms wouldn't bother at all. According to Nottingham University's Centre for Management Buy-out and Private Equity Research, transactions between private equity firms accounted for 49% of the value of all Western European buyouts -- and 44% of value in the U.K. -- in the first nine months of 2010.

Nor has the pattern been much distorted by a few big deals, such as Bridgepoint Capital Ltd.'s £955 million ($1.5 billion) sale of Pets at Home Ltd. to Kohlberg Kravis Roberts & Co., or the €2.5 billion ($3.3 billion) sale of German publisher Springer Science+Business Media Deutschland GmbH to EQT Partners AB by Cinven Ltd. and Candover Partners plc. About 55% of all U.K. buyout transactions in the period were secondary or even tertiary buyouts. (The figure was 23% of deals in Western Europe, a significant proportion, given the immaturity of certain European markets.)

No wonder limited partners are beginning to complain. Ed Truell, founder and director of U.K. investor Pension Corp. LLP, recently attacked "timid and lazy" private equity managers who failed to buy on the cheap when they had the chance in 2008 and 2009 and are now acquiring businesses from each other at ever-higher prices. Not all investors are as outspoken as Truell. But there's a note of irritation each time an LP tells the story of receiving two e-mails from investee funds on the same day: The first is from one general partner, breaking the news of a profitable exit and exciting returns to investors. The second is a capital call from another, who has overpaid for the same company with the same investor's money.

GPs retort that LPs have only themselves to blame if they invest in more than one private equity fund in the same niche. A skillful fund manager will invest in a range of GPs, which might differ in fund size, sector focus, geography or business model. Indeed, even the grumpiest LPs acknowledge there is nothing wrong with a transformational buyout in which a bigger or more internationally focused private equity buyer brings skills and resources that are beyond the scope of the primary team.

But the scale of the secondary buyout phenomenon suggests some GPs have less edifying motivations than expanding the companies in their care.

Of the roughly €263 billion raised in 257 European funds of €100 million or more between 2004 and 2009, only €142 billion had actually been drawn down by the end of June, according to research by midmarket placement agent Acanthus Advisers Private Equity Ltd. Many of those funds will be coming to the end of their investment periods and are under pressure to call capital -- or face losing the outstanding commitments. More recent vintages, many of which were reluctant to invest in 2008 and 2009, are now keen to put their investors' money to work. How else can they pocket the management fees that will keep them in business while carried interest remains a distant dream?

On the exit side, Acanthus' figures show only €31 billion has been distributed to investors. A further €120 billion remains in portfolio companies as unrealized value, implying many funds are still underwater. GPs are keen to make the premium exits that will keep their LPs on board and start putting their older funds in carry. With the IPO markets largely closed, and trade buyers hovering on the sidelines (CMBOR figures show private equity buyouts accounted for a record 73% of all U.K. M&A activity in the first half of 2010), secondary exits are often the only route available.

Put the two phenomena of hungry sellers and even hungrier buyers together, and it is little wonder that valuations this year are often back at levels last seen in 2006 or 2007.

Not all private equity firms have been equally timid and lazy. Some have genuinely sought out primary deals, dared to make the valuations and, if necessary, even paid 100% of the equity, in the hope of securing a banking package at a better time. It is also true that even the best deals have often been stymied by overcautious banks. The lenders would far rather roll over the debt in a secondary buyout than put up new finance for a proprietary deal.

However, some LPs do have grounds to complain. They can help themselves, in part, by extending the investment periods of certain funds -- perhaps forcing reductions in management fees in return -- to take the pressure off GPs to "use or lose" the undrawn commitments.

In the end, they have only one real sanction: Warn the greediest firms they will never raise a fund again.