Fund Structure
Management Fee
The annual fee paid by LPs to the GP to cover the cost of operating the fund, typically 1.5-2% of commitments during the investment period.
Management fees fund the GP's salaries, office, travel, and deal sourcing infrastructure. The standard is 1.5-2% of committed capital during the investment period, stepping down to a lower percentage of invested or net invested capital thereafter.
Fee offsets matter as much as the headline rate. Transaction fees, monitoring fees, broken-deal expenses, and director fees collected from portfolio companies should offset the management fee at 80-100% under modern ILPA-aligned terms. Older funds often had lower offset percentages, which materially shifts economics.
LPs should model lifetime management fee dollars - not just the rate - and compare against the fund's projected gross-to-net spread.