Giant buyout funds are likely a thing of the past, and new cash raised will be for medium-sized, specialist funds, a top executive of British private equity firm Terra Firma Capital Partners Ltd said on Wednesday.

I think the $20 billion fund, or even the $10 billion fund is going to be very, very difficult to raise going forward, if possible at all, and so in general, funds are simply going to be smaller, said chairman and chief investment officer Guy Hands.

Hands, speaking at the Super Return Middle East private equity conference, said in the future it is likely that less capital will be focused on private equity.

That's partly because investors still have large commitments outstanding to funds raised in 2006-2008, and also because private equity firms have been constrained from exiting investments and returning cash to investors.

The average private equity executive's net earnings per fund is likely to drop a minimum of 80 percent from the peak reached in 2007, he said.

Many of the senior people need to work for the next 20 years to make same amount of money that they made in 2005-7, said Hands.

Therefore, people who go into private equity today have to enjoy building lasting value in companies, he said.

Hands said he's optimistic about the long-term prospects for private equity, but is unclear as to the prospects for Western economies.

My personal guess is that in the West we are currently in the eye of the storm and the calm we feel will eventually give way to more panic as we try and deal with a level of debt both public and private on a scale which has never been seen before, he said.

Terra Firma owns music business EMI, a 4 billion pound ($6.54 billion) buyout struck at the height of the buyout boom in 2007.

The ailing music group accounted for the vast majority of Terra Firma's 1.37 billion euro ($1.96 billion) writedowns this year and Terra Firma was forced to inject extra capital into EMI twice in just six months.

Hands said in September that talks with Citigroup Inc, the bank that holds EMI's debt, were ongoing in a gentlemanly and constructive way. He declined to give an update on Wednesday.

A source familiar with the negotiations previously told Reuters that Terra Firma offered to inject 330 million pounds in equity in return for the bank agreeing to a debt restructuring.

Hands, previously chairman and chief executive officer of Terra Firma, relinquished day-to-day control of the firm in March to concentrate on investments and building relations with investors.

In August Terra Firma agreed to buy Everpower Wind Holdings in a deal that a source said at the time was worth around $350 million. That followed a deal in March to buy Australia's second-largest beef producer Consolidated Pastoral Company.

(editing by John Stonestreet)