VC & PE Glossary
What Is Management Fee During Harvest?
Updated
Definition
Management fee during harvest is the reduced or re-based fee LPs pay after a fund stops making new investments, while the GP manages portfolio companies toward exit.
Useful for: Founders, Investors
Management fee during harvest refers to how a fund’s management fee is calculated and collected after the investment period ends, when the GP focuses on exiting existing portfolio companies rather than deploying new capital.
How it works
Most venture funds define an investment period—often four to five years from first close. During that window, fees commonly run at ~2% of committed capital. When the period expires, the fund enters harvest (or wind-down):
- Fee rate may step down (e.g., from 2% to 1.5%)
- Fee basis may shift from committed capital to net invested capital (capital still at work in portfolio companies)
- Some LPAs cap total fee years or tie fees to remaining NAV
Example: a fund called $100M, deployed $90M, and returned $20M from early exits. Harvest fees on invested capital might apply to $70M still deployed—materially less than fees on the full $100M commitment.
Terms are negotiated in the LPA at formation. Extensions of fund life may restart or modify harvest fee schedules.
Why it matters
- Founders: Your board member’s fund may be in harvest—fewer new investments from that vintage but continued support until your exit or their fund extension.
- Investors: Harvest fees affect net IRR for years. Compare step-down mechanics across GPs; some remain expensive relative to remaining work.
Common mistake
Assuming fees automatically stop when the investment period ends. Most funds continue charging harvest fees until final liquidation unless the LPA specifies a hard termination date.
Related ideas
See also management fee, investment period, fund extension, and distribution.
Related terms
- Harvest Period — The harvest period is the late phase of a private equity or venture fund's life when the general partner focuses on exiting portfolio companies and returning capital to limited partners rather than making new investments.
- Management Fee — Management fee is the annual charge LPs pay the GP—typically a percentage of committed or invested capital—to cover firm operating costs, distinct from carried interest on profits.
Common questions
Short answers for founders, LPs, and operators