The Math Behind Fund-of-Funds Fee Structures

Fund-of-funds charge fees on top of underlying manager fees. This double-fee structure is often criticized, but understanding the math explains why it persists and what it means for managers.

Fund-of-funds need their underlying managers to deliver top-quartile performance because median returns don't justify their fee layer. When pitching them, emphasize gross return potential explicitly.

Key topics: fund-of-funds, fee structures, management fees, carried interest, LP investing, capital allocation, raising capital, private equity, venture capital, emerging managers, fund managers, institutional investors, portfolio construction, alternative investments, GP-LP relationships, asset allocation, wealth building, two and twenty.

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