Term: Management fee

A fee charged at first against the value of an LP’s capital commitment to a fund. Management fees are typically between 1.25 percent and 2 percent. The management fee is meant to pay for the operation of the private equity firm and there is an ongoing debate about what exactly this fee should support and how large it should be relative to the size of the fund. As in: I want my GPs to eat peanut butter sandwiches on the management fee and caviar on the carried interest.

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