A thing that I “knew” but had never considered in as many words:
VC funds by custom are described as charging charge 2 and 20. (2% management fee on assets; 20% of profits).
They actually charge 20 and 20. One of the 20s is split over 10 years (mgmt fee is annual).
VC funds by custom are described as charging charge 2 and 20. (2% management fee on assets; 20% of profits).
They actually charge 20 and 20. One of the 20s is split over 10 years (mgmt fee is annual).
I understand why the microeconomics of running a fund make that management fee really crucial, particularly for newer firms, but the part of me interested in pricing psychology notes how different it feels when phrased as 20/20.
(There’s some nuance here on how quickly capital is deployed, etc etc.)
