“Fair” usually means market-standard, fund-size appropriate, and aligned with LP expectations.
- Management fee:
- Often front-loaded
- Common pattern: about 3% to 3.5% during the investment period, then 1% to 1.5% later
- The “2%” people quote is often a life-of-fund average, not a flat annual fee
- Carry:
- 20% is the standard benchmark
- Higher or lower can work if clearly justified by strategy, access, or manager track record
- GP commitment:
- Should show real alignment, but still be feasible
- It is not uncommon to use management fee distributions, after taxes, to help fund the GP commit
References:
- https://decilehub.com/base/1-general_questions/163512-how-is-the-management-fee-typically-structured-over-the-life-of-the-fund-and-can-the-gp-change-the-rate-year-to-year
- https://decilehub.com/base/1-general_questions/21499-how-common-is-it-that-gps-contribute-their-capital-from-management-fees-rather-than-cash-to-meet-their-fund-participation-obligation-what-about-first-time-partners-that-might-not-have-the-cash
- Management fee:
- Often front-loaded
- Common pattern: about 3% to 3.5% during the investment period, then 1% to 1.5% later
- The “2%” people quote is often a life-of-fund average, not a flat annual fee
- Carry:
- 20% is the standard benchmark
- Higher or lower can work if clearly justified by strategy, access, or manager track record
- GP commitment:
- Should show real alignment, but still be feasible
- It is not uncommon to use management fee distributions, after taxes, to help fund the GP commit
References:
- https://decilehub.com/base/1-general_questions/163512-how-is-the-management-fee-typically-structured-over-the-life-of-the-fund-and-can-the-gp-change-the-rate-year-to-year
- https://decilehub.com/base/1-general_questions/21499-how-common-is-it-that-gps-contribute-their-capital-from-management-fees-rather-than-cash-to-meet-their-fund-participation-obligation-what-about-first-time-partners-that-might-not-have-the-cash