Glossary · Fund Accounting
Management Fee
A management fee is the periodic fee a fund pays its investment manager, calculated as a percentage of assets or committed capital regardless of performance.
The management fee compensates the manager for running the fund. Hedge funds typically charge a percentage of NAV (sometimes GAV), accrued at each valuation point and paid monthly or quarterly. Private funds typically charge a percentage of committed capital during the investment period and of invested capital afterward, as set out in the LPA.
Fee terms often vary by share class or investor through side letters, including discounts, fee breaks by size, and offsets of transaction or monitoring fees earned by the manager. Each variation must be reflected accurately at investor level.
Pitfalls include accruing on the wrong base (for example pre- versus post-subscription NAV), incorrect day-count conventions, missing fee waivers or offsets, and not pro-rating fees for mid-period subscriptions or redemptions. Management fee calculations are a standard check in shadow accounting.
Example
A fund with $50M NAV charges a 2% annual management fee accrued monthly. Monthly accrual = $50M × 2% ÷ 12 = $83,333.33. Over a quarter at a constant NAV, the fee totals $250,000.
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