Management fees are the annual fees charged by a general partner (GP) to cover the operating costs of managing a fund, including salaries, office expenses, travel, and technology. Typically expressed as a percentage of committed capital during the investment period and invested capital (or NAV) during the harvest period, management fees range from 1.0% to 2.5% depending on strategy and fund size.
The management fee structure varies by fund type. Private equity buyout funds typically charge 1.5-2.0% on committed capital during the investment period (usually 5 years) and then step down to 1.0-1.5% on invested capital. Hedge funds charge 1.0-2.0% on NAV. Credit funds charge 1.0-1.5%. Infrastructure and real estate funds are in a similar range. Larger funds tend to have lower fee rates due to economies of scale.
Management fees are the foundation of GP economics and the primary determinant of GP stakes valuations. Unlike carried interest, which depends on fund performance, management fees are contractually guaranteed for the life of the fund (typically 10-12 years with extensions). This creates a highly predictable, recurring revenue stream that GP stakes buyers value at 10-25x fee-related earnings (FRE).
Fee pressure from institutional LPs has been a persistent trend. Large pension funds, sovereign wealth funds, and family offices increasingly negotiate reduced management fees, fee offsets for co-investment income, and most favored nation (MFN) clauses. Despite this pressure, aggregate management fee revenue across the industry continues to grow because AUM growth outpaces fee rate compression.
Our platform tracks management fee revenue indicators across the GP universe through AUM data, fund count, and estimated fee rates. This data is essential for GP stakes investors seeking to value management companies and identify managers with stable, growing fee streams. Managers with multi-product platforms (PE + credit + real estate) typically command higher GP stakes valuations due to fee diversification.
The management fee model has also evolved with the rise of permanent capital vehicles (PCVs), business development companies (BDCs), and listed alternative asset managers. These structures provide permanent fee streams that are not subject to the traditional fundraising cycle, making them particularly attractive for GP stakes investors.