Emerging Managers Are Rethinking Fund Fees, March 2025
For first-time fund managers, structuring fees isn’t just about covering operational costs—it’s an opportunity to build LP confidence and fundraising momentum. Traditionally, the industry standard in venture capital has been to charge a 2% management fee over a 10-year fund lifecycle, adding up to 20% in total fees.
But as emerging managers look for ways to stay competitive, our data shows a clear shift away from this static model. In this report, we analyze a sample of 39 funds run on Sydecar, the managers of which are making intentional fee adjustments, such as front-loading during the investment period, reducing costs post-deployment, and ensuring LPs aren’t paying for inactive capital.
Managers are Breaking from the 20% Lifetime Fee
Nearly 60% of Sydecar fund managers change their fee structures to front-load fees during the investment period instead of charging a flat percentage over the fund's life. On average, these funds only collect 13.3% in lifetime fees, far lower than the traditional 20% model.
Rather than sticking to a rigid 2% per year for a decade, managers are choosing to collect the bulk of fees when they are most active—during the investment period. This shift helps cover initial fund operating costs upfront, reduces long-term fee drag on LPs, and makes future fundraises easier by showing LPs a more efficient cost structure.
Front-Loaded Fees Lead to Lower Post-Deployment Costs
Some managers structure fees so that they are concentrated within the active investment period. 36% of managers collect fees only during the investment period, which averages 2.79 years, with a total fee of 11.5%. Another 21% of funds decrease fees after deployment, with an average annual fee reduction of 0.84%. Those who reduce fees post-deployment see an average total fee of 15.03%—still far below the standard 20% model.
This trend suggests that emerging managers are front-loading their fees when they are actively investing, then tapering off once capital is deployed. This approach ensures LPs aren’t paying high fees while a fund is inactive, makes fee structures more competitive in a tough fundraising market, and encourages LPs to reinvest in future funds since they aren’t burdened with fees on legacy funds.
Fund Size Alone Doesn’t Dictate Fee Structures
There is no strong correlation between fund size and fee structure. In fact, fee decisions appear to be driven more by investment strategy than AUM. The largest 30% of funds are slightly more likely to charge the full 20% lifetime fee, but this isn’t a universal trend. 88% of managers who charge fees over the full fund lifecycle stick with the traditional 20% model.
While larger funds may have more flexibility to lower fees, many still choose the standard model. Emerging managers should focus on aligning fees with fund strategy and LP expectations rather than assuming that a higher AUM allows for automatic fee reductions.
Flexible Fees Help Managers Build Stronger LP Relationships
Many managers are choosing adaptive fee structures to better align incentives with LPs. By keeping fees leaner post-deployment, they create a more transparent cost structure that makes it easier to attract repeat investors in future funds.
LPs appreciate transparency, and fee structures that prioritize active fund periods may resonate better than static models. Managers who reduce costs post-deployment can build stronger trust with LPs, leading to more competitive offerings in a capital-constrained market.
How Sydecar's Fund+ Supports This Shift
Our data shows a clear industry trend: emerging managers are optimizing their fees for efficiency, transparency, and long-term LP trust. This shift aligns with Sydecar’s Fund+ platform, which empowers fund managers to reduce operational burdens, streamline fund administration, and ensure LP confidence by keeping fee structures lean and fund costs transparent.
Sydecar provides one of the most cost-effective fund administration solutions in the market, offering a fully integrated platform that includes fund entity creation, compliance, tax support, regulatory filings, and reporting—all within its base pricing. Emerging managers using Sydecar can deploy more capital into investments rather than spending on overhead, ensuring that more of their fund goes toward generating returns. Compared to other options, Sydecar’s pricing structure allows first-time managers to maintain fee efficiency without sacrificing the critical services needed to operate their funds.
For first-time fund managers, the right admin platform can make or break fee efficiency. Sydecar's Fund+ gives emerging managers the tools to structure fees strategically while keeping costs low. To learn more about Fund+, visit our page here:
The traditional 20% lifetime fee model is fading, as fund managers embrace flexible, front-loaded, and LP-friendly fee structures. Instead of a one-size-fits-all approach, emerging managers are taking control of their fee strategy—reducing long-term costs, prioritizing LP relationships, and increasing fundraising success.
For first-time managers, the key takeaway is clear: Fee transparency and flexibility create stronger LP relationships, improve fundraising outcomes, and set the foundation for long-term success.