Management fees on private investment pools?
Posted by admin on 11 Jul 2010 12:56 pm. Filed under Investing.
AnnaBelle
What typically are management fees (both management and incentive fees) for pooled investment vehicles, such as private equity pools and limited partnerships? I read in Wikipedia the “2 and 20″ rule, with 2% management fee on total assets and 20% of total return, for both the Hedge Fund and the Venture Capital definition. However, I was not certain that was universal, or just what Wikipedia contributors came in with. Thank you.
What typically are management fees (both management and incentive fees) for pooled investment vehicles, such as private equity pools and limited partnerships? I read in Wikipedia the “2 and 20″ rule, with 2% management fee on total assets and 20% of total return, for both the Hedge Fund and the Venture Capital definition. However, I was not certain that was universal, or just what Wikipedia contributors came in with. Thank you.
3 Comments to “Management fees on private investment pools?”
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On July 14th, 2010 at 8:02 am
Common enough, but it all depends on how much you are bringing to the table and how badly the pool or partner needs it. These things are often negotiable to the degree of importance or significance that your contribution involves. If you are some twerp with the minimum listed (or rumored) then you won’t get the kind of deal that someone named Buffett or Trump would get (significantly sweeter, I can promise you that).
On July 17th, 2010 at 9:37 am
“2 and 20″ is a pretty standard fee structure among hedge funds and private investment vehicles. The management fee is used to cover operating expenses, while the incentive fee is used to pay the fund manager based on performance.
On July 19th, 2010 at 2:13 pm
That’s common.
Places like Vanguard don’t pay that when they hire an outside manager, but they are in a position to place billions so they are in a position to negotiate. That’s how they keep their fees so low.