Access isn't free — what feeders and SPVs actually cost
Carry is the headline number. The hidden friction is in the structure. A breakdown of where the real economics sit.
The first time you get offered access to a brand-name fund through a feeder vehicle or SPV, the pitch sounds clean: “20% carry, 2% management fee, $100K minimum, you get exposure to a fund you couldn’t otherwise touch.”
Read the docs. The economics are not what you think.
The four layers
A typical feeder structure stacks four economic layers between you and the underlying portfolio company:
- Underlying fund fees — usually 2/20 at the fund level
- Feeder management fee — often 1-2% on top
- Feeder carry — often 5-10% on top, sometimes more
- Setup and admin fees — fixed annual costs, can be 0.5-1% on smaller commitments
A “20% carry” feeder into a “20% carry” fund isn’t 20% carry. It’s roughly 28-30% effective carry by the time both layers compound, plus an extra 1-2% annual management fee drag, plus admin.
On a 3x gross fund return over 10 years, that stack can compress your net return from ~2.5x to ~1.7x. On a 5x fund, it compresses ~4x to ~2.6x.
Most feeders don’t disclose this stacked-economics view. It’s all in the docs, but you have to assemble it yourself.
What actually justifies the structure
Two things, sometimes:
- Genuine access. If the underlying fund is closed and oversubscribed, the feeder is your only route in. Net 1.7x in a top-decile fund still beats anything you could do solo.
- Diligence and curation. If the feeder operator is selecting across many funds and you trust their selection, that’s a service worth paying for.
Neither is automatic. Both are claims to verify.
What to ask before signing
- “Show me the all-in economics on a 3x and a 5x scenario, net to me”
- “What’s the management fee step-down profile across the term”
- “What’s the recycling provision and how does it interact with feeder-level carry”
- “Who’s the fund admin and have they done this structure before”
- “What happens to my interest if the feeder GP departs”
Most feeder pitches answer none of these in writing without prompting.
The simpler benchmark
Run the numbers against the alternative: just buying the largest publicly listed fund-of-funds vehicles, or the most direct comparable index. The premium you’re paying for “access” should be visible in expected return, after fees, after time. If it isn’t, the structure isn’t doing the work it claims.
Access has value. It also has a price. The price is rarely on the cover page.