Management fees allow the fund manager to meet their own operating costs, including salaries for the team and regulatory compliance. These fees are expressed as a percentage of the funds raised and tend to vary in a band between 1.5% and 2.5%.
Carried interest is used to describe the fund manager’s performance-related share of realised profits from investments – usually 20% – after the investors have achieved a certain level of returns. As carried interest is only allocated after investments are realised, it incentivises private equity firms to focus on operational improvements and the long term realisation prospects for an investment.
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+44 (0)20 7492 0400