---
title: "What Is Fee Waiver?"
term: "Fee Waiver"
description: "A fee waiver is an agreement by a fund manager to forgive or reduce management fees—often offsetting fees against GP co-invest or carry—to align economics with LPs or support fundraising."
date: 2026-07-25T00:00:00.000Z
updated: 2026-07-25T00:00:00.000Z
topics: ["venture-capital"]
source: https://venturecapitaltracker.com/glossary/fee-waiver
---

# What Is Fee Waiver?

> A fee waiver is an agreement by a fund manager to forgive or reduce management fees—often offsetting fees against GP co-invest or carry—to align economics with LPs or support fundraising.

**A fee waiver** is a contractual reduction or elimination of management fees that would otherwise be charged to the fund or its limited partners, typically documented in the LPA or side letters.

### How it works

Venture funds commonly charge ~2% annually on committed or invested capital during the investment period. GPs may **waive** fees for specific LPs (strategic anchors), for all LPs in a first-time fund to ease fundraising, or offset fees dollar-for-dollar against GP co-invest commitments. Some waivers step down after the investment period or tie to deployment milestones.

Waivers differ from [partnership expenses](/glossary/partnership-expenses) passthrough—those remain. They also differ from fee **discounts** via early-closing incentives. Accounting treats waived fees as GP economic contribution, sometimes enhancing carry alignment narratives in LP meetings.

Excessive waivers without other revenue can strain operating budgets—salaries, travel, and legal costs still land on the management company.

### Why it matters

- **Founders:** Indirect effect only—under-resourced GPs struggling after broad waivers may slow support; well-capitalized platforms waive tactically without cutting service.
- **Investors:** Compare net fee load across vintages; side-letter waivers create unequal economics within the same fund.

### Common mistake

LPs assuming permanent waivers without reading sunset clauses. Many revert to full fee after fund III or when commitments exceed thresholds.

### Related ideas

See [partnership expenses](/glossary/partnership-expenses), management fee, GP co-invest, and side letter.

## FAQ

### What is a fee waiver in simple terms?

The GP agrees not to charge some or all of the usual annual management fee— sometimes because they invest enough of their own money or want to win a large LP commitment.

### Why does fee waiver matter?

For LPs, it improves net returns and signals GP alignment. For GPs, waivers reduce cash to run the firm unless offset by other funds or fee streams— sustainability matters.


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Source: https://venturecapitaltracker.com/glossary/fee-waiver