Fee Variation in Private Equity

65 Pages Posted: 24 Feb 2020 Last revised: 20 Jan 2023

See all articles by Juliane Begenau

Juliane Begenau

Stanford University - Graduate School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Emil Siriwardane

Harvard Business School - Finance Unit; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: September 16, 2022

Abstract

We study how investment fees vary within private-capital 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.

Keywords: Pension Funds, Private Equity, Fee Dispersion, Search and Negotiation Frictions

JEL Classification: G23, G24, G51

Suggested Citation

Begenau, Juliane and Siriwardane, Emil, Fee Variation in Private Equity (September 16, 2022). Available at SSRN: https://ssrn.com/abstract=3526469 or http://dx.doi.org/10.2139/ssrn.3526469

Juliane Begenau (Contact Author)

Stanford University - Graduate School of Business ( email )

Stanford, CA 94305
United States
6507245661 (Phone)

National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
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Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Emil Siriwardane

Harvard Business School - Finance Unit ( email )

Boston, MA 02163
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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