Definition of Private Equity Management Fees

Management fees are fees that investors in the private equity sector (/en/blog/quest-ce-que-le-private-equity-pe) must pay to fund managers (usually as an annual percentage). This generally covers services such as decision-making, portfolio monitoring, industry and market observation, access to public and private sector benefits, etc. Fund managers also receive fees for transaction execution and investment analysis.

At fund level, the management fee rate is generally 1 to 2 percent of total assets under management, but this amount can vary according to the type of fund or the level of risk and return expected. In general, the structure of management fees is the same for all funds: a higher flat rate for the first few years, and a lower rate for subsequent years.

Management fees are essential to providing a return to the investor, as they enable fund managers to continue providing quality services and to discover and exploit new opportunities. Indeed, fund managers are often remunerated on the basis of their fund's level of performance, through capital remuneration.