What is a key characteristic of a management fee in a private equity fund?

A management fee in a private equity fund is typically calculated as a percentage of the committed capital, usually ranging from 1% to 2%. This fee is intended to compensate the fund managers for their operational and administrative responsibilities, including sourcing deals, conducting due diligence, and managing investments over the lifecycle of the fund. The percentage is standard in the industry, providing investors with a predictable cost structure based on their committed capital.

The fee is not fixed irrespective of capital, nor does it vary directly based on the number of investors. It also does not get eliminated once a certain investment threshold is reached; instead, it continues to apply to the total committed capital throughout the fund's duration, adjusting only if there are changes in committed capital over time due to new capital calls or other factors. Therefore, the characteristic that it usually ranges from 1-2% of committed capital captures the essence of management fees in private equity funds accurately.