Glossary
Fund Management Fee
The Fund Management Fee is the ongoing fee charged to a Private Markets fund for its administration and operations. It is levied regardless of investment results. During the investment period it is usually calculated on committed capital, and on capital still invested thereafter. The basis of calculation often determines the actual cost more than the percentage itself.
At a glance
- The Fund Management Fee does not depend on performance. It is charged even in years without any increase in value. That makes it the counterpart to Carried Interest, which arises only on gains.
- The basis of calculation is what matters. If the fee is charged on committed capital, it also applies to money the fund has not yet drawn down.
- With fund terms of ten years and more, the fee accumulates over the entire period. A return figure is therefore only meaningful if it states whether it is stated gross or net of costs.
- The Fund Management Fee is not the same as the Management Fee of a wealth management mandate. Both can apply alongside each other, one at mandate level and one inside the fund.
Frequently asked questions
Because the manager does the work up front. Investments are sourced, screened and negotiated before any money flows, and that activity begins at subscription, not at the first capital call. For the investor it still means that costs start before the capital is actually invested. Comparing two funds therefore means looking not only at the percentages, but also at what they are calculated on.
