Management fee
A management fee is the recurring charge a fund manager takes for operating the fund, calculated as a percentage of either committed capital or net asset value, and payable regardless of whether the fund performs.
The base the fee is charged on matters as much as the rate. A fee on committed capital is charged on everything investors have pledged, including capital not yet deployed. A fee on net asset value is charged on what the fund currently holds. On the same nominal rate, a fee on commitments is the more expensive of the two during the early years of a fund.
Management fees are a fixed drag, which means they weigh proportionally heavier on a small fund than a large one. A 2 percent fee on a EUR 5 million fund is EUR 100,000 a year against a much smaller asset base than the same rate on a EUR 500 million fund.
Read the fee alongside entry and exit charges, and alongside whatever operating expenses the fund is permitted to charge separately. The headline rate is rarely the total cost.
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