What it is
The management fee pays the GP to run the fund regardless of performance. Its base matters a lot: a fee on committed capital is charged on money you’ve promised but that may sit uninvested; a fee on invested capital is charged only on money actually deployed in properties.
How it works
Example: an LP commits $500,000; in year 1 only $200,000 is invested. A 2% fee on committed capital = $10,000. A 2% fee on invested capital = $4,000. A 1.5% fee on invested capital = $3,000.Watch also for other fees paid to the GP or affiliates (acquisition, disposition, financing, asset- or property-management fees) and fund expenses charged to LPs. Organizational expenses should be capped, and GP overhead (salaries, office) should be borne by the GP.
Good for LPs vs. watch out for
✓ Good for LPs
- Fee on invested, not committed, capital
- Step-down after the investment period
- Organizational expenses capped
- All affiliate fees disclosed and either eliminated or offset against the management fee
- GP pays its own overhead
⚠ Watch out for
- 2%+ on committed capital for the whole life
- Long, open-ended list of “fund expenses”
- Undisclosed affiliate fees stacked at the property level
- Fees that rise when performance falls
How Story Samurai Investments handles it
The template charges [PLACEHOLDER – between 1% and 2%] per year on invested capital, not committed capital, paid quarterly (LPA §6.1), with a step-down to [PLACEHOLDER]% after [PLACEHOLDER – trigger] (LPA §6.2). Affiliate fees are limited to those listed in the PPM: [PLACEHOLDER – list or “none”] (LPA §6.3). Organizational expenses are capped at [PLACEHOLDER]; the GP bears its own overhead (LPA §6.4).
Based on our template documents (TEMPLATE, DRAFT FOR ATTORNEY REVIEW, NOT FOR USE). The final Limited Partnership Agreement controls.
Where to find it in the documents
- LPA Art. 6
- PPM §1, §6
- Risk Factors #10