<P> In a private equity fund, the management fee is an annual payment made by the limited partners in the fund to the fund's manager (e.g., the private equity firm) to pay for the private equity firm's investment operations . </P> <P> Often the management fee is initially based on the total investor commitments to the fund (i.e., the fund size) as investments are made . After the end of the commitment period, ordinarily 4--6 years, the basis for calculating the fee will change to the cost basis of the fund, less any investments that have been realized or written - off . </P> <P> Management fees rates will range from 1.0% to 2.0% per annum during the initial commitment period and will then often step down by 0.5--1.0% from the original rate through the termination of the fund . </P> <P> Typically, the managers will also receive an incentive fee based on the performance of the fund, known as the carried interest . </P>

When are management fees charged on mutual funds