As private debt has come into its own as an asset class, its fee structures have evolved to be significantly different from those of private equity, particularly regarding the management fee charge.
This levy has typically been on invested assets, which is enticing to investors because it doesn’t pay managers until they put capital to work. But if a firm raises $2 billion, investors could end up paying fees on $2.5 billion because of definitions surrounding invested capital. There are other aspects to fees that private debt investors should be aware of, including potential charges on levered capital.
In the above podcast, Private Debt Investor talks to Kirkland & Ellis partner Erica Berthou and Cliffwater chief executive Steve Nesbitt to help peel back each layer of the fee onion.