Large private equity firms fishing for the next huge deal may ultimately not profit as much from their big catch as their smaller counterparts, according to Business Week. True, the mega deals of this year – Kohlberg Kravis Roberts purchase of HCA for $33 billion tops among them – have brought 40% level gains for not only KKR in its buyout but also to The Blackstone Group, The Carlyle Group and Texas Pacific in their respective deals. Tempting as that may be, Paul Hicks of Hicks Holdings told Business Week, that those levels won’t last, and the law of diminishing returns will set in, making the big deals less profitable. That is why he says he prefers smaller targets. Just last week he teamed up with Investcorp to buy a Dallas-based trucking company for just $730 million. It’s that approach, he says, that has garnered him consistent returns of 30% or more – and led him to pass up a deal with some large p.e. firms for Clear Channel Communications. Thomas H. Lee and Bain Capital Partners ended up shelling out $18.7 billion in that deal. Hicks says it "came down to who was willing to accept the lowest equity return. I think they are looking at a return in the high teens." That is where future mega deals may end up, especially as rising interest rates will lead to fewer financial engineering opportunities. "All studies show that the top quartile of private equity funds outperform the market," Jim Leach of Ontario Teachers Pension Plan’s in-house private equity fund said in a Business Week interview. "But other than that they don’t necessarily outperform the public market. It’s a question of how good your private equity manager is."