Bridger PenningtonFund Launch & Investment Expert

Investors, Beware of Hidden Fees!

22 Feb 2025 · 1 min

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1:04

In this monologue, Bridger Pennington warns investors about deceptive fee structures commonly found in private equity and venture funds. He explains how some funds present a 2% annual management fee as a one‑time 20% prepaid charge over a ten‑year horizon, effectively taking a portion of the capital before any investment is made. He also highlights additional hidden costs such as upfront preference (pref) fees, acquisition fees, and a 20% carried interest, illustrating how these layers can dramatically erode investor returns. Pennington stresses that many investors are unaware of these practices and urges them to scrutinize fee disclosures and understand the underlying math to avoid being overcharged.

Chapters

I've seen a bunch of funds come out recently that have— they pitch a 2% management fee, 80/20 split, but then in their docs, in the little subtitles, they say, well, this is a 2% fee over 10 years. And so what they do is they say 2% times 10 years is 20%. You're prepaying your management fees. You actually only put in $80,000 because the $20,000 they took and put it right into their, their own pockets, which I think is super unethical and not good to do. You should not do this in your fund. And I've met a lot of investors, they had no clue. Or somebody will say, no, it's not 10 years, it's 5 years. So we'll take a 10% pref upfront for just putting the deal together. Oh, and then we're gonna charge an acquisition fee, and then we're gonna charge 20% carried interest. I mean, it's bonkers to do Like, investing is hard enough. If you take a 20% fee up front at $80 grand, you've gotta get, I think the math is roughly a 24% return. Make sure you understand the fees, okay?