Fee Step-Down

A reduction in a fund's management fee rate or base after its investment period ends.

Example

2% of committed capital for five years, then 1.5% of invested capital for the remaining five.

Important

Two funds quoting the same headline fee can differ by several percent of commitments in total fees depending on the step-down.

Related terms

  • Management fee — A recurring charge for running an investment, usually quoted as a percentage of the assets held and taken every year regardless of the result.
  • Committed capital — The total amount an investor has contractually agreed to provide to a fund, whether or not it has yet been called.

Lessons that explain it

  • Add up the fees for all ten years before you compare two funds — Management fees are usually quoted as an annual percentage, but what matters is the total over the fund's life, and whether the fee is charged on committed or invested capital. (10 min)

All 578 terms in the Investing glossary