General · Global
Fees and costs in private markets
The charges that sit between your commitment and your outcome, and how to ask about them.
Summary
Private-market investments carry several layers of cost, including management fees, performance fees, set-up and transaction charges, and costs inside the structure, and they all reduce what you keep.
- Ask for a full list of charges in writing, at every level.
- Check what the fee is charged on: committed or invested capital.
- Compare net outcomes, not just headline rates.
What kinds of fees exist?
Common charges are management fees, performance fees (carried interest), set-up fees, transaction fees and ongoing administration costs.
A manager may charge an annual fee on committed or invested capital and a share of profits above a hurdle. Arranging, legal and audit costs may be paid by the fund or the investor. Advisers or platforms may add their own charges.
What is the fee charged on?
Fees can apply to commitments, invested amounts or net asset value, and the difference can change the cost materially.
A fee on committed capital is paid even while cash is uninvested. A fee on invested capital reduces as investments are sold. Ask when fees start, when they stop and how they change over the life of the product.
How do performance fees work?
The manager receives a share of profits, usually only after investors have received their capital back and, often, a minimum return.
Details include the hurdle rate, whether there is a catch-up, and whether profits are assessed deal by deal or across the whole fund. These terms decide how much is paid and when.
What should you ask?
Ask for every fee and cost, who receives it, how it is calculated, and what the outcome looks like after all charges.
Ask whether any party is paid by the product provider, including introducers, and how that is disclosed. Check what happens to fees if the product underperforms or is delayed.
Frequently asked questions
Are fees negotiable?
Sometimes, especially for larger commitments or early investors, but terms are often standard.
What is a hurdle rate?
A minimum return investors must receive before the manager earns a performance fee.
Why do headline returns differ from what investors receive?
Charges and timing of cash flows reduce the outcome, so ask for net figures.
Should advisers disclose what they are paid?
Rules differ by country, but clear disclosure helps investors judge whether advice is independent.
This article is general information for eligible investors. It is not investment advice or an offer. Capital is at risk. See our Terms and Risk warning.
