Fund Fees

The annual management fee that GPs charge LPs to cover the cost of running a fund — typically 2% of committed capital (“2 and 20”). The incentive question: in an era when a “3x fund” was considered top tier (pre-2019), partners could make most of their money on fees, not carry, because the bar was low enough that management fees over a 10-year fund life could exceed carry. Jason Lemkin’s framing: “in a ‘2x net’ fund, the partners might still make the majority of their money off fees — not ‘carry’ from investing.”

Today’s landscape has shifted: LPs expect 4x net or better, with some cohorts delivering 5–10x. At those multiples, carry dwarfs fees, and “no one cares anymore if partners are making tons in ‘fees’ for managing money if they can repeatedly deliver 4x+ net funds.” The fee discussion fades when returns justify them. See Fund Economics and Incentives for the broader structure.

Where this appears

• A Lot of Older Times… (tweet)