Fees & Economics
What is Management Fee?
A management fee is the annual fee a fund charges to cover operating costs, typically around 2% of committed (then invested) capital. It is paid to the general partner regardless of fund performance.
The management fee funds the GP’s operations — salaries, deal sourcing, due diligence, and overhead. It is most commonly ~2% per year, often charged on committed capital during the investment period and on invested capital thereafter.
Because it is performance-independent, the management fee is the GP’s base income, while carried interest is the upside. Larger funds and established managers sometimes charge below 2%.