Tentt

Fund Fee Calculator

Model the full economics of a PE fund: management fees, carried interest, hurdle rates, and catch-up. Compare 2-and-20 against any structure.

Net LP MOIC

2.03x

After fees & carry

Net LP IRR

7.3%

Gross: 9.6%

Total fee drag

2.3%

Gross IRR − Net IRR

Cumulative mgmt fees

$87,500,000

Carried interest

$150,000,000

Net LP proceeds

$1,012,500,000

Side-by-side: same gross MOIC, different fee structures

StructureNet MOICNet IRRTotal fees
2 and 202.03x7.3%$237,500,000
1.5 and 202.06x7.5%$218,750,000
1 and 301.95x6.9%$275,000,000
100% private

Your numbers never leave your browser. Tentt has no backend, no database, and no record of anything you type into this calculator — the math runs entirely on your device. Output is for illustrative modelling only and does not constitute investment, tax, legal, or accounting advice; verify any number you intend to act on.

What is a fund fee calculator?

Private equity is built on a particular fee structure that has barely changed since the 1980s: a 2% annual management fee on committed capital, plus 20% carried interest on profits above contributed capital. The shorthand for this structure is "2 and 20", and it is the starting point for almost every middle-market PE fund LPA in circulation today. The structure looks simple, but the cumulative drag on LP returns over a ten-year fund life is large enough that LPs spend enormous diligence energy modelling it before they commit to a fund — and yet, until now, no free interactive web tool existed for the calculation.

This page solves that. Type in a fund's committed capital, fund life, investment period, and management fee structure, and the calculator returns the cumulative management fee load, the carried interest at exit, the resulting net LP MOIC and IRR, and a side-by-side comparison of three common fee structures applied to the same gross MOIC. The output is the exact set of numbers an LP needs to compare two fundraising vehicles head-to-head.

The 2-and-20 formula

Cumulative management fees are the simpler of the two components — they accrue independently of fund performance.

Cumulative management fees

Mgmt Fees = (Mgmt Fee % × Committed × Investment Yrs) + (Step-Down % × Committed × Harvest Yrs)

Carried interest is performance-based and only kicks in once the fund has returned more than the contributed capital. In its simplest form (no hurdle, no catch-up):

Carried interest

Carry = Carry % × Max(0, Gross Proceeds − Contributed Capital)

Net LP proceeds are gross proceeds minus management fees minus carried interest. Net MOIC is net LP proceeds divided by committed capital. The gross-to- net IRR conversion uses the same closed-form trick the MOIC calculator uses: IRR = MOIC^(1/years) − 1.

Worked example

Worked example

A middle-market PE fund raises $500M in committed capital with a standard 10-year life, 5-year investment period, 2% / 1.5% management fee step-down, and 20% carry. The fund delivers a 2.5x gross MOIC over the full 10 years.

Cumulative management fees: ($500M × 2% × 5 yrs) + ($500M × 1.5% × 5 yrs) = $50M + $37.5M = $87.5M.

Gross proceeds: $500M × 2.5 = $1.25B. Profits above contributed capital: $750M. Carried interest: 20% × $750M = $150M.

Net LP proceeds: $1.25B − $87.5M − $150M = ~$1.01B. Net LP MOIC: ~$1.01B / $500M ≈ 2.02x. Net LP IRR: 2.02 ^ (1/10) − 1 ≈ 7.3%. Compare to the 9.6% gross IRR the same gross MOIC produces over the same hold — about 230 bps of fee drag, which is in line with the institutional benchmark for middle-market buyout funds.

Comparing fee structures

The side-by-side table at the bottom of the calculator is the most useful exhibit on this page. It applies three common fee structures — 2-and-20, 1.5-and-20, and 1-and-30 — to the same gross MOIC and shows what each delivers in net LP terms. The differences are usually counterintuitive: a 1-and-30 structure looks bad on the carry rate but actually beats 2-and-20 for LPs on lower-performing funds because the management fee load is so much smaller. The crossover point is around a 2.0x gross MOIC — above that, 2-and-20 starts to beat 1-and-30 because the higher carry rate outweighs the lower mgmt fee.

This calculator uses a simplified no-hurdle, no- catch-up convention so the math stays focused on cumulative fee drag. For the per-deal hurdle and catch-up mechanics, see the dedicated waterfall distribution calculator. For the underlying deal-level returns that produce the gross MOIC input, see the LBO calculator, and for a back-of-envelope MOIC-to-IRR conversion use the MOIC calculator.

Frequently asked questions

What does '2 and 20' mean?
'2 and 20' is the standard private equity and hedge fund fee structure: a 2% annual management fee on committed capital plus 20% carried interest on profits above contributed capital. Over a typical 10-year fund life with a five-year investment period and a step-down to 1.5% in the harvest period, the cumulative management fee load on a $500M fund is roughly $87.5M, plus 20% of profits-above-capital at exit. The structure has been the industry default since the 1980s and is still the starting point for almost every middle-market PE fund LPA today.
What is the management fee step-down?
Most PE fund LPAs charge the full management fee (typically 2.0% of committed capital) only during the investment period (years 1–5), then step down to a lower rate during the harvest period (years 6–10). The step-down is often expressed as 'X% of committed capital' or 'Y% of invested capital' — both produce roughly similar numbers but the math differs slightly. The calculator above uses the committed-capital convention because it is more common in middle-market funds and easier to model. The step-down typically reduces the annual fee from 2.0% to 1.5% or 1.0%.
How do management fees affect LP returns?
Management fees are charged annually regardless of fund performance, which makes them the single largest source of LP fee drag in most funds. On a 10-year fund delivering a 2.5x gross MOIC, the standard 2-and-20 fee load typically reduces net LP MOIC to roughly 2.0x to 2.1x — a 15% to 20% haircut on the gross outcome. Net IRR drops from approximately 9.6% to about 7.2% to 7.6% over a 10-year hold. The haircut is much more painful on lower-performing funds: a 1.5x gross MOIC fund delivers roughly a 1.25x net MOIC after fees, which is a hair above the LP's risk-free rate.
Why do some funds charge less than 2-and-20?
First-time fund managers, smaller funds (sub-$200M), and funds raising in difficult fundraising environments often offer LPs a discount to attract commitments. Common alternatives include 1.5-and-20 (haircut on the management fee), 1.5-and-15 (haircut on both), or '20-on-20' structures where carry only applies to performance above a 20% IRR hurdle. Larger funds with strong performance track records can sometimes charge above 2-and-20 ('super-carry' on outperformance, or premium management fees on flagship vehicles), but those structures are uncommon outside the top decile of GPs.
Does carried interest get charged on every dollar of profit?
No — carry is charged only on profits above contributed capital, and only after the preferred return (hurdle) has been satisfied. Most LPAs include an 8% compounded hurdle rate, which means the GP earns no carry until LPs have received their committed capital plus an 8% annual return. The dedicated waterfall calculator on this site models the full hurdle, GP catch-up, and residual split mechanics in detail. This calculator uses a simplified no-hurdle convention because the focus here is on cumulative fee drag, not on the per-deal mechanics.
What is the difference between gross and net IRR?
Gross IRR is the deal-level return before any fund-level fees or carry are deducted. Net IRR is the LP-level return after management fees, carry, and any other fund expenses are deducted. The gap between the two is the cumulative fee drag — typically 200 to 400 basis points on a 10-year buyout fund under standard 2-and-20 economics. LPs evaluate funds primarily on net IRR because that is what they actually receive; GPs report both because gross IRR is the cleanest measure of investment skill.

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