Annual Management Fee

This covers the normal operating expenses such as salary and allowances of employees, administrative expenses and all expenses related to the selection of investments as well as disinvestment but excludes legal expenses and professional fee related to investment portfolio which are reimbursed separately. It is generally 2-3 per cent of the net asset value (NAV) or the capital of the funds the latter being the more preferred basis.

Carried Interest

The most popular approach is that the general partner contributes one per cent and the limited partners contribute 99 per cent of the capital of the fund. The general partner normally receives one fifth of the net gains as carried interest while the remaining four fifths is distributed among the limited partners.


The benefit of limited partnership, as a form of structuring of VCIs, is its tax treatment. The profit of limited partnership is only at the level of the partners. It is completely tax free if the partner is a tax free entity such as pension funds. The second advantage is operational in the sense that the fund managers are entitled to an incentive in the form of carried interest. However, a major drawback is the unlimited liability of the general partner. Moreover, he is liable to tax on gains on sale of investments, whether distributed or not. Nevertheless, on balance the advantages outweigh the disadvantages and limited partnership emerges as a satisfactory form of venture capital organisation.

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