Skip to main content
Newsletter
CarryBeast

Invested / unrealized-cost fee basis

Last updated

Quick Answer

An invested-capital fee basis charges the management fee on capital actually deployed and still held, rather than on total commitments.1,2

What it is

As investments are realized, the base shrinks and the fee falls with it. It is the conventional basis after the investment period ends, and it aligns the fee with the portfolio the manager is actually managing rather than with the size of the fund raised.1,2

Operational context

What good looks like

Why It Matters

A shrinking base means fee income falls as the portfolio is realized, which is the mechanism that stops a winding-down fund paying fees on capital the manager no longer manages.1

Term Family

Related concepts

Committed-capital fee basis

Frequently Asked Questions

What is Invested / unrealized-cost fee basis in venture capital?

As investments are realized, the base shrinks and the fee falls with it. It is the conventional basis after the investment period ends, and it aligns the fee with the portfolio the manager is actually managing rather than with the size of the fund raised.

Why is Invested / unrealized-cost fee basis important for startups?

Understanding Invested / unrealized-cost 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(An invested-capital fee basis charges the management fee on capital actually deployed and still held, rather than on total commitments.)primary · T1 · fees-economics · structure
  2. 2.ilpa-principles-3 — ILPA Private Equity Principles 3.0 (2019)ILPA Private Equity Principles 3.0 (2019)ILPA(An invested-capital fee basis charges the management fee on capital actually deployed and still held, rather than on total commitments.)primary · T1 · 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(An invested-capital fee basis charges the management fee on capital actually deployed and still held, rather than on total commitments.)secondary · T2 · fees-economics · structure

Newsletter

CarryBeast Brief

Carry math, waterfall tiers, and incentive design. Every Tuesday.

Archstone

Run your fund like an institution.

See Archstone