Management Fee Drag
Compare the net return impact of a standard 2/20 fund structure versus a direct co-investment.
Commingled (2/20)
Direct Co-Invest
The Co-Investment Premium
Standard private equity funds charge a 2% management fee on committed capital during the investment period (often stepping down after) and a 20% performance fee (carry) over an 8% hurdle.
Direct co-investments are typically offered on a "no-fee, no-carry" or heavily discounted basis. Over a 10-year fund life, the compounding effect of avoiding management fees on uncalled capital and retaining 100% of the upside results in a massive delta in net returns.