A management company is a separate entity (usually a Delaware LLC) that employs the fund's investment professionals, receives management fees, and provides advisory services to the fund under an investment management agreement.
Why It Matters
Separating the management company from the GP provides liability insulation, simplifies multi-fund economics, and creates a clean entity for employment relationships and fee collection. Institutional LPs expect this separation. Running everything through the GP entity creates unnecessary risk and complicates future fundraises.
Key Details
- Connected to the fund through an investment management agreement (IMA) that defines the scope of advisory services and fee terms.
- Receives the management fee, typically 1.5% to 2% of committed capital during the investment period.
- Employs the investment team and operational staff, holding all employment-related liabilities separate from the fund.
- Can serve multiple funds, allowing a single team to manage successive vehicles without duplicating entities.
- Required for institutional credibility when raising from pensions, endowments, and fund-of-funds allocators.
For a deeper look at how the management company fits alongside the GP, see the GP and Management Company Guide.
Capital Company handles management fee calculations and management company accounting as part of fund administration, including fee offsets and budget tracking.
This content is for informational purposes only and does not constitute legal, tax, or compliance advice. Consult qualified counsel for guidance specific to your situation.