Syndication Fund - Fee Structure

3 Replies

I am looking for some clarity on the fund management fee for syndication funds. Would love some insight from anyone who has reviewed multiple PPM's. 

- What is the fee most commonly based on? (i.e. called capital, assets under management, or income related)

- What is a typical % for the fund management fee and is it always annual?

- Does the fee stay the same throughout the life of the fund or does it decrease as initial capital is returned?

    It always seems that the fee is 1%. But 1% of WHAT is the real question.  

    Some groups charge 1% of income. Some, it's of committed capital. Others it's contributed capital. Others is property value, which is regularly marked to market, often with opaque formulas. And yet others base it off of total debt and equity.

    Which method is used really matters. 1% of income and 1% of debt and equity are both 1% but they are miles apart when measured in dollars.

    The only way to know is to read the operating agreement.

    I think you have to look at tall the fees being charged. Is there an Acquisition, Disposition, Loan, and all other type of fee. I would say "norm" is 1 to 2 percent of gross income. The Feee stays the same for the life of the fund and paid monthly. 

    @Colton Fairchild I personally don't operate with a fund structure but reading the operating agreement with give you the details. I have seen 1-2% to be most common, but 1-2% of what matters. Some charge based off capital, asset value, debt&equity, etc. At the end of the day, the % should not be the most important to you. It should be who is the fund? What does their Character and Integrity look like? Track record? Is it a fund that invests with other operators or into their own deals? Is their a box that they have to stay in when buying assets? Etc. I am 100% OK paying mucher higher fees to a fund as long as I trust them and believe the returns are worthwhile. 

    I would use the same approach for a syndication as well. I would have no problem paying healthy fees to an operator if they are the real deal.