Like hedge funds, private equity funds are typically structured as limited partnerships where outside investors are limited Partners and the private equity firm, which may manage a number of funds, is the general Partner. Most private equity firms charge both a management fee and an incentive fee. The management fees generally range from 1 to 3 percent, while the incentive fee is typically 20%.
What is unique to private equity is this notion of committed capital. This is the amount that the LPs have agreed to provide to the private equity fund. The committed capital remains with the LPs until the private equity fund draws from it for investment opportunities that it has identified.