As we discussed at the beginning of this series, RollingSouth is a Rolling Fund powered by AngelList. They explain how Rolling Funds work here. There are several things you should consider RollingSouth’s structure – fees, carry, and GP commitment – which we cover in this and the next posts.
On fees, VentureSouth believes in two things:
- complete transparency. (You can see every detail of all our usual costs on our blog.)
- keeping fees as low as we can.
These principles apply to RollingSouth, whose fees are laid out below and are lower than most other Rolling (and “Traditional”) Funds.
Investment funds charge a management fee, typically this is 2% of invested capital. Given the infrastructure RollingSouth uses at AngelList and VentureSouth, our fees are lower – 0.15% per year at AngelList at 1% per year for the fund managers. Investment funds often charge other fees for lots of minor things. RollingSouth will not.
Investment funds charge a “carried interest” (a share of the net gain on the fund). RollingSouth does too: ours is 15%.
The standard rate is 20%: if you get all your invested capital back (including fees) back, you pay 20% of incremental gains to the fund manager.
We have no issue with sharing the positive returns – it is a good model for aligning incentives and rewarding good investors – and no real problem with 20% being standard. But we think 15% is fair, and so our rate is lower. On $50,000 at a 3x (net) returned fund, this delta is an extra $5,000 in the investor’s pocket.
With a much lower management fee, lower carry, and a commitment to no nickel-and-diming on other fees, we think RollingSouth does everything possible to be transparent and investor-friendly on fees. If you agree, sign up!
RollingSouth’s GP commitment
As Alexander Hamilton says, “When you got skin in the game, you stay in the game”. The “GP commitment” (the investment that the managers of the fund will invest through the fund) varies substantially across investment funds. The “average” is 1% of committed capital.
At RollingSouth, the GP will invest at least 10% of the fund, or a minimum of $25K per quarter. Incentives are best aligned when investors have skin in the game, and we intend to have more skin in the game than most fund managers.