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Committed-capital fee basis

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Quick Answer

A committed-capital fee basis charges the management fee on the total capital limited partners have committed, whether or not it has been drawn.1,2

What it is

The fee is calculated on the full commitment from the outset, so it does not depend on deployment pace. It is the conventional basis during a fund's investment period, and it means a slow-investing manager collects the same fee as a fast one.1,2

Operational context

What good looks like

Why It Matters

Charging on the full commitment makes fee income independent of deployment pace, so a manager that invests slowly is paid the same as one that invests quickly over the same investment period.1

Term Family

Related concepts

Invested / unrealized-cost fee basis

Frequently Asked Questions

What is Committed-capital fee basis in venture capital?

The fee is calculated on the full commitment from the outset, so it does not depend on deployment pace. It is the conventional basis during a fund's investment period, and it means a slow-investing manager collects the same fee as a fast one.

Why is Committed-capital fee basis important for startups?

Understanding Committed-capital fee basis is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.

Sources & References

  1. 1.ilpa-model-lpa-wof-ts — ILPA Model LPA Term Sheet — Whole-of-Fund Waterfall Version (July 2020)ILPA Model LPA Term Sheet — Whole-of-Fund Waterfall Version (July 2020)ILPA(A committed-capital fee basis charges the management fee on the total capital limited partners have committed, whether or not it has been drawn.)primary · T1 · fees-economics · structure
  2. 2.preqin-pro-glossary — Preqin Pro Glossary of TermsPreqin Pro Glossary of TermsPreqin (BlackRock)(A committed-capital fee basis charges the management fee on the total capital limited partners have committed, whether or not it has been drawn.)secondary · T2 · fees-economics · structure
  3. 3.metrick-yasuda — Metrick & Yasuda, *The Economics of Private Equity Funds* (Rev. Fin. Stud. 2010)Metrick & Yasuda, *The Economics of Private Equity Funds* (Rev. Fin. Stud. 2010)Wharton / Rodney White Center(A committed-capital fee basis charges the management fee on the total capital limited partners have committed, whether or not it has been drawn.)secondary · T2 · fees-economics · structure

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