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Who pays the management fee

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Quick Answer

Limited partners pay the management fee; it is charged to the fund rather than to portfolio companies.1,2

What it is

The fee is met from limited partners' capital, either by drawdown or by netting against distributions. Where the manager also charges portfolio companies directly for monitoring or transaction services, the offset provision determines how much of that is credited back against the fee limited partners pay.1,2

Operational context

What good looks like

Why It Matters

Naming the payer is what makes the offset provision legible: the fee comes out of limited partners' capital, so fees the manager also bills portfolio companies are charged to the same investors twice.1

Term Family

Related concepts

Management fee

Frequently Asked Questions

What is Who pays the management fee in venture capital?

The fee is met from limited partners' capital, either by drawdown or by netting against distributions. Where the manager also charges portfolio companies directly for monitoring or transaction services, the offset provision determines how much of that is credited back against the fee limited...

Why is Who pays the management fee important for startups?

Understanding Who pays the management fee 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-reporting-template-2 — ILPA Reporting Template v2.0 — Suggested Guidance (January 2025)ILPA Reporting Template v2.0 — Suggested Guidance (January 2025)ILPA(Limited partners pay the management fee; it is charged to the fund rather than to portfolio companies.)primary · T1 · fees-economics · term
  2. 2.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(Limited partners pay the management fee; it is charged to the fund rather than to portfolio companies.)primary · T1 · fees-economics · term

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