Managing a $10 billion fund has its benefits. For example, the management fees and transaction fees alone can generate more than $1 billion over 10 years. Add carry to the mix, and the whole mega-mega fund endeavor becomes nice work, if you can get it. The friction associated with fees has led limited partners to welcome co-investment vehicles, which have the effect of allowing LPs to invest directly in deals without paying the same level in management fees and carry.
Below is an example of a hypothetical $10 billion fund and the fees that it would generate over a 10-year period, given a set of assumptions. To simplify the example, the hypothetical fund invests in one deal each year for five years; each deal involves $2 billion in equity. Each deal returns a 15% IRR after a five-year holding period, and is therefore exited at a 2x gross return. The other assumptions are based in part on the terms of an actual US-based mega-fund raised recently, on the reported transaction fees from a recent US buyout mega-deal, and on interviews with advisors to institutional investors.