Management Fee
Private Credit glossary · Fund Structures, Returns & Economics
Definition
Annual fee paid by LPs to the GP, typically 1.0–2.0% of committed capital during the investment period and stepping down to a lower percentage on invested capital thereafter.
Management Fee in plain English
When a group of investors (the LPs, or "limited partners") hands their money to a professional firm (the GP, or "general partner") to invest, the GP charges a yearly fee just for running the fund — that's the management fee. Think of it like a property manager who takes a small slice of the money you gave them every year to cover salaries, research, and keeping the lights on, whether or not the investments do well. It usually runs about 1 to 2 percent per year of the total money you promised to the fund while they're still busy putting it to work, then drops to a smaller percentage once the money is actually invested. It's separate from any share of the profits the GP earns — this is just the steady "we're doing the work" fee.
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