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The Math Behind Fund-of-Funds Fee Structures
Fund-of-funds charge fees on top of underlying manager fees. This double-fee structure is often criticized, but understanding the math explains why it persists and what it means for managers.
Fund-of-funds need their underlying managers to deliver top-quartile performance because median returns don't justify their fee layer. When pitching them, emphasize gross return potential explicitly.
Key topics: fund-of-funds, fee structures, management fees, carried interest, LP investing, capital allocation, raising capital, private equity, venture capital, emerging managers, fund managers, institutional investors, portfolio construction, alternative investments, GP-LP relationships, asset allocation, wealth building, two and twenty.
The Capital Stack — a daily briefing for anyone raising or allocating private capital: family offices, institutional investors, fund managers, and trusted advisors navigating the full investor landscape.
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By Thomas CarterFund-of-funds charge fees on top of underlying manager fees. This double-fee structure is often criticized, but understanding the math explains why it persists and what it means for managers.
Fund-of-funds need their underlying managers to deliver top-quartile performance because median returns don't justify their fee layer. When pitching them, emphasize gross return potential explicitly.
Key topics: fund-of-funds, fee structures, management fees, carried interest, LP investing, capital allocation, raising capital, private equity, venture capital, emerging managers, fund managers, institutional investors, portfolio construction, alternative investments, GP-LP relationships, asset allocation, wealth building, two and twenty.
The Capital Stack — a daily briefing for anyone raising or allocating private capital: family offices, institutional investors, fund managers, and trusted advisors navigating the full investor landscape.
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