Management Fee Basis

Allocator relevance: High — small basis differences can materially change total fees and therefore net returns.

Expanded Definition
Common bases include:

• Committed capital (often during investment period),
• Invested capital at cost (deployments),
• NAV (post-investment period in some structures).
  A fund may transition from one basis to another (often alongside a step-down). Allocators model fee outcomes under each basis because “2%” can mean very different dollars depending on what it’s applied to and how quickly the base declines after realizations or write-offs.

Decision Authority & Governance
Governance requires explicit LPA definitions (what counts as invested capital, how write-offs are treated, whether cash reserves are included in NAV basis), transparent fee statements, and auditability. Allocators often request fee calculation examples and reconciliation schedules.

Common Misconceptions

• Headline fee rate determines fee burden.
• NAV basis is always cheaper.
• Basis definitions are standardized across managers.

Key Takeaways

• Fee basis is often more important than fee rate.
• Transitions and exclusions drive fairness and comparability.
• Demand transparent fee calculation support.