What is the transaction cost of private equity funds?
The transaction cost of private equity funds mainly includes four aspects: subscription fee, fixed management fee, floating management fee and redemption fee. Let's take a look at them one by one.
Transaction costs of private equity funds I. Subscription fees
Subscription fee is a one-time fee that investors need to pay when they subscribe for funds during the fund raising period. Subscription fees are mainly used for various expenses incurred during the recruitment period such as marketing, sales and registration. The specific subscription fee rate varies with different fund types, and is usually 1%-3% of the amount promised by investors. For example, if an investor buys a private equity fund with a subscription rate of 1%, the investor needs to remit10/10,000 yuan into the bank account. Some funds do not charge subscription fees.
Private equity fund transaction fee II. Fixed management fee
Fixed management fees are the remuneration paid by investors to fund managers, including trust management fees, bank custody fees and attorney fees, as well as a series of expenses incurred in the daily operation of private equity funds. The specific rate of management fee varies with different types of funds, usually about 2%/ year of the amount promised by investors. This fee is usually accrued on a daily basis and deducted directly from the fund assets. The latest fund net value seen by investors has deducted this fee.
Private equity fund transaction fee. Floating management fee
Floating management fee, also known as performance compensation, is the biggest source of income for private equity fund companies. Private equity funds should extract some profits as performance compensation to fund managers before distributing income, which is the most important income of fund managers. Formally, it can be 20% of the total profit of the fund, 20% of the profit extracted from the project, 20% of the excess profit except the guaranteed income for investors, or other forms. Please refer to the product contract for details. Performance compensation is also directly deducted from the fund assets.
Private equity fund transaction fee. Redemption fee
The raising period of private equity funds is generally 1-3 months, and it will enter a closed period at the end of the raising period. Usually, most private equity funds have redemption closure period and quasi-redemption closure period. The redemption period is generally 1-6 months, during which investors are not allowed to purchase or redeem. The closing period of quasi-redemption is generally 6- 12 months, during which investors are allowed to redeem, but usually a redemption fee of 3%-5% is required. In the industry, only a few private equity products do not charge redemption fees.
The above is the transaction cost of private equity funds that the private placement network will tell you today. Let's summarize the investment expenses of private equity funds from four aspects:
The first is the subscription fee, which is usually 1%-3% of the investment, and is charged extra;
Second, the fixed management fee, generally 2%/ year, is deducted from the net value of the fund;
Third, the floating management fee, also called performance reward, is generally 20% of the fund's profit or 20% after exceeding a certain profit line. This is the main source of interest for fund management companies, and it is also the source of power for fund management.
The fourth is the redemption fee, which includes two small points. Investors are not allowed to purchase or redeem during the redemption closed period, and the quasi-redemption closed period requires a redemption fee of 3%-5%, which is still relatively high. Therefore, the private placement network reminds that investing in private placement funds needs to make a reasonable assessment of the liquidity demand, and then make a scientific and reasonable investment decision.
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