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Fee Variation in Private Equity

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  • JULIANE BEGENAU
  • EMIL N. SIRIWARDANE

Abstract

We study how investment fees vary within private equity funds. Net‐of‐fee return clustering suggests that most funds have two tiers of fees, and we decompose differences across tiers into both management‐ and performance‐based fees. Managers of venture capital funds and those in high demand are less likely to use multiple fee schedules. Some investors consistently pay lower fees relative to others within their funds. Investor size, experience, and past performance explain some but not all of this effect, suggesting that unobserved traits like negotiation skill or bargaining power materially impact the fees that investors pay to access private markets.

Suggested Citation

  • Juliane Begenau & Emil N. Siriwardane, 2024. "Fee Variation in Private Equity," Journal of Finance, American Finance Association, vol. 79(2), pages 1199-1247, April.
    • Handle: RePEc:bla:jfinan:v:79:y:2024:i:2:p:1199-1247
    DOI: 10.1111/jofi.13319
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