wwwreuterscom– Neil Unmack is a Reuters columnist. The views expressed are his own —

It’s a sign of how bad things are in the private equity industry that some buyout funds are asking their investors for additional capital to prop up ailing portfolio companies.

But such moves can be messy. Investors should be wary of throwing good money after bad, and even more careful of rewarding failed managers.

Private equity portfolio companies will soon have to start refinancing a wall of maturing bank debt. Unless the leveraged loan markets recover, new equity capital will be needed.

The first port of call will be existing investors in the buyout funds. The argument is that raising cash early would allow a troubled portfolio company to tackle the problem early, for example by buying back debt at a discount.