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Management fee calculator for a fund
Enter fund size, the fee rate during the investment period, the stepped-down rate after it, fund life and organizational costs. The calculator shows total fees, their share of commitments and the capital left to invest.
Fund and deal returns
Total management fees
$17,500,000
- Fees as a share of commitments
- 17.5%
- Yearly fee in the investment period
- $2,000,000
- Capital left to invest
- $82,000,000
Planning estimate from the figures you enter. Not investment, tax or legal advice.
How it is calculated
- Yearly fee early = fund size x fee rate.
- Total fees = yearly fee x investment years + fund size x later rate x remaining years.
- Capital left to invest = fund size minus total fees minus organizational costs.
Worked example: A $100 million fund at 2% then 1.5%
| Fee years 1 to 5 | $2,000,000 a year |
| Fee years 6 to 10 | $1,500,000 a year |
| Total fees | $17,500,000 (17.5%) |
| Organizational costs | $500,000 |
| Capital left to invest | $82,000,000 |
The fee is the GP budget
For an emerging manager the management fee pays salaries, office, fund administration, audit and the data room. Build a firm budget for each year and check the fee covers it at the fund size you can realistically close.
If the budget only works at the target size, a smaller first close becomes a problem. Model the fee at the first close too.
What LPs check
LPs read the fee terms in the LPA and the PPM and ask in the DDQ how the fee is calculated, what it offsets and how it changes after the investment period. Keep a one-page fee summary in the room next to the LPA so the answer is the same everywhere.
Recycling
Some LPAs let the GP recycle early proceeds to invest fees back into deals, so more of the commitments end up invested. If your fund allows it, say so in the summary.
Mistakes to avoid
- Budgeting the firm at the target fund size only.
- Leaving organizational costs and fund expenses out of investable capital.
- Describing the step-down differently in the PPM and the DDQ.
- Forgetting fee offsets for placement or transaction fees.
Questions and answers
What is a typical management fee?
Many private funds charge around 2% of commitments during the investment period and step down after it, but larger and newer funds vary widely. Your LPA is what counts.
What is a fee offset?
A clause that reduces the management fee by part or all of fees the GP earns from portfolio companies or pays to placement agents.
Should the fee model be in the data room?
A short fee summary should be, next to the LPA and the PPM. A full firm budget usually goes only to anchor LPs who ask.