Management fee waiver

An arrangement in which a manager or general partner gives up management fees in exchange for a contingent interest in future profits. Economic and tax effects depend on the arrangement and applicable law.

Management fee waiver in practice

Hypothetical: a manager makes a binding election to waive specified future fees for a contingent profits allocation. Whether this arrangement funds a general-partner commitment depends on its terms; the commitment itself is not waived. Investors may distinguish a fee-waiver-funded commitment from one funded with the general partner’s own cash. The future allocation is not guaranteed to equal the forgone fee.

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