What is a Management Fee? How PE & VC Fund Fees Are Calculated

Q: What is a typical management fee?

Around 2% a year is common for private equity and venture funds, with larger funds often lower and smaller or newer funds sometimes higher.

Q: Is the management fee charged on committed or invested capital?

Commonly on committed capital during the investment period and on invested capital afterwards, but the LPA decides.

Q: What is the difference between management fee and carried interest?

The management fee is paid regardless of performance. Carried interest is paid only out of profits, after LPs have been repaid.

By aama.io Fund Operations Team · Last reviewed 2 October 2026

A management fee is the annual fee a fund pays its manager to cover operating costs, regardless of performance. In private equity and venture capital it is commonly around 2% a year, charged on committed capital during the investment period and on invested capital afterwards, and it is funded through capital calls.

Sourced information — it can change

This page is compiled from public sources (listed at the bottom) and last reviewed on 2 October 2026. Regulations, thresholds, fees and market practice change, so it may not reflect the latest position. Check with your fund documents (LPA), MAS and IRAS (for incentive conditions) and legal counsel before acting.

Key facts

Typical rate	About 1.5%–2.5% a year (negotiated per fund)
Investment period basis	Committed capital
Post-investment-period basis	Invested capital or NAV, often at a lower rate
Paid	Quarterly or semi-annually, usually in advance
Funded by	Capital calls on LPs
Defined in	The limited partnership agreement

How it works

Fee basis is set. The LPA sets the rate and the basis. During the investment period (commonly the first five years) the basis is committed capital.
Basis steps down. After the investment period, the fee is typically charged on invested capital, or net invested capital after realisations, sometimes at a reduced rate.
Fee is called and paid. The fee is included in capital calls and paid to the manager each period, normally in advance.
Offsets are applied. Where the LPA provides, transaction, monitoring or director fees received by the manager are offset against the management fee.

Worked example: $100M fund, 2% fee, 10-year life

Years 1–5 are charged on $100M of commitments. Years 6–10 are charged on $60M of invested capital (held constant for simplicity).

Years 1–5: 2% × $100M = $2.0M a year	$10.0M
Years 6–10: 2% × $60M = $1.2M a year	$6.0M
Total management fees over the fund's life	$16.0M
Capital left to invest ($100M − $16.0M)	$84.0M

About 16% of commitments goes to fees over the fund's life, so only about $84M is available to invest. This fee drag is why gross and net returns differ.

Common mistakes

Charging the post-investment-period fee on commitments instead of the stepped-down basis.
Not applying fee offsets in the calculation.
Pro-rating partial periods and late-closing LPs inconsistently, including catch-up fees for later closings.
Ignoring fees when comparing gross and net returns.

The Singapore and APAC angle

Fee terms are commercial and set in the fund documents. For VCCs, calculate and book fees at sub-fund level, and check how the fee interacts with any tax incentive conditions you rely on.

Frequently asked questions

What is a typical management fee?

Is the management fee charged on committed or invested capital?

What is the difference between management fee and carried interest?

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Related terms

Carried Interest

Carried interest, or carry, is the share of a fund's profits paid to the general partner as performance compensation, typically 20%. It is earned only after limited partners have received their capital back and, in most funds, a preferred return, and it is paid through the fund's distribution waterfall.

Capital Call

A capital call, also called a drawdown, is a formal request from a fund manager for limited partners to pay in part of the capital they committed. Funds call capital as needed for investments, fees and expenses, rather than collecting the full commitment upfront, and each LP pays pro rata to its commitment.

Sources

ILPA Principles 3.0

General information, not tax, legal, accounting or investment advice. This content is sourced from the references above and from public regulatory material, and it can become outdated. Always confirm the current position with your fund documents (LPA), MAS and IRAS (for incentive conditions) and legal counsel, and take professional advice for your specific situation, before relying on it.