What a fund pays its GP, and what it costs LPs
Set the fund size, fee schedule and expected gross multiple. See management fees year by year, how much capital is actually left to invest, the GP's carry and total economics, and how far fees and carry pull LP net returns below gross.
- Management fees total 13.9% of commitments over 10 years.
- Carry is 62% of the GP's fee and carry income; fees are 38%.
Management fees by year
Year by year
Invested capital is shown at cost, net of realizations, at year end.
| Year | Invested | Fee basis | Fee | Cumulative fees | Proceeds |
|---|---|---|---|---|---|
| 1 | $85.74M | $500M | $10M | $10M | $0 |
| 2 | $171.48M | $500M | $10M | $20M | $0 |
| 3 | $257.22M | $500M | $10M | $30M | $0 |
| 4 | $342.97M | $500M | $10M | $40M | $0 |
| 5 | $428.71M | $500M | $10M | $50M | $0 |
| 6 | $342.97M | $428.71M | $6.43M | $56.43M | $214.35M |
| 7 | $257.22M | $342.97M | $5.14M | $61.58M | $214.35M |
| 8 | $171.48M | $257.22M | $3.86M | $65.43M | $214.35M |
| 9 | $85.74M | $171.48M | $2.57M | $68.01M | $214.35M |
| 10 | $0 | $85.74M | $1.29M | $69.29M | $214.35M |
| Total | $69.29M | $1.07B |
GP carry vs gross MOIC
Same fund terms, different gross outcomes.
| Gross MOIC | Proceeds | GP carry | LP net MOIC | LP net IRR | Total GP |
|---|---|---|---|---|---|
| 1.5x | $643.06M | $0 | 1.29x | 4.4% | $72.15M |
| 2.0x | $857.42M | $70.05M | 1.57x | 8.3% | $146.49M |
| 2.5x | $1.07B | $112.07M | 1.91x | 12.0% | $192.79M |
| 3.0x | $1.29B | $154.08M | 2.26x | 15.2% | $239.09M |
| 3.5x | $1.5B | $196.09M | 2.60x | 18.1% | $285.4M |
Acquifolio records commitments, calls and fees per investor, and restricts approvals of calls and distributions to Owner and Partner roles.
Assumes even deployment over the investment period, cost returned evenly from the first post-investment year to the end of the term at the same gross multiple, fees funded from commitments, no fee offsets or recycling, and an annual whole-fund waterfall with a 100% catch-up. Not investment, tax or legal advice. Everything runs in your browser and nothing you enter is stored or sent.
How it works
- Fees: during the investment period,
fee = commitments × fee rate. Afterwards the stepped-down rate applies to either commitments or invested capital still held at cost. - Capital for investment is commitments minus lifetime fees and organizational expenses, because fees are called from commitments. It is deployed evenly over the investment period.
- Realizations: invested capital is returned evenly from the first year after the investment period to the end of the term, each dollar at the gross MOIC you enter.
- Carry runs an annual European waterfall on the LP share: return of all contributions (including fees), a compounding preferred return, a 100% GP catch-up, then the carry split. The GP commitment bears its share of fees but pays no carry.
- Total GP economics =
management fees + carry + profit on the GP commitment. Fee drag is gross MOIC on invested capital minus LP net MOIC.
Questions
What is a typical private equity management fee?+
The classic structure is 2% of committed capital during a five-year investment period, stepping down to 1.5% to 1.75% afterwards. Larger funds often charge less (1.5% or lower), and many LPAs switch the basis to invested capital after the investment period so fees fall as companies are sold.
What does 'fee basis on invested capital' mean?+
After the investment period, the fee is charged on the cost of investments still held by the fund instead of total commitments. As deals are realized the basis shrinks, so fees decline year by year. This can cut lifetime fees materially compared with charging on commitments for the full term.
How much of the GP's income comes from fees vs carry?+
For a mid-sized buyout fund earning around 2.0x to 2.5x gross, carry and fees are often of similar magnitude; for larger funds fees can dominate, which is why LPs push for fee step-downs and offsets. Use the sensitivity table to see how the mix shifts as gross returns change.
Why is LP net MOIC so much lower than gross MOIC?+
Two reasons. Fees and organizational costs are called from commitments, so less than 100% of LP capital is ever invested, and carry takes a share of profit above the hurdle. Together these typically reduce MOIC by 0.4 to 0.7 turns for a 2.5x gross fund.
European or American waterfall: return of capital, preferred return, GP catch-up and carried interest, tier by tier.
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