Private Equity Spotlight Should semi-liquids charge 2 and 20?
Jul 29, 2025
The rise of semi-liquid and evergreen funds is reshaping private equity, with over $30 billion raised since 2020. A deep dive into the 2-and-20 fee model raises questions about its relevance for these new structures. The discussion highlights the need for alignment between managers and investors, examining how management fees impact capital deployment. Unique fee structures differentiate semi-liquid funds from traditional models, focusing on total returns and the treatment of realized and unrealized gains.
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Reinvesting Nature Impacts Fees
- Semi-liquid and evergreen funds usually reinvest income or gains instead of distributing them.
- The traditional distribution-based incentive model does not fit well with these fund structures.
NAV Basis for Fees
- Semi-liquid funds often deploy capital quickly unlike traditional drawdown funds.
- Management fees are typically calculated on the NAV, including realized and unrealized gains.
Semi-Liquids Resemble Hedge Funds
- Semi-liquid funds resemble hedge funds by drawing capital upfront for immediate deployment.
- Investors prefer knowing that capital is effectively drawn and invested quickly.