Total fees and expenses are capped at a maximum 5.9% by an Expense Limitation Agreement.
Fees and expenses are an important consideration to weigh with any investment. Please review the Cashmere Fund Prospectus carefully.
Management fee
The Cashmere Fund charges a 2.5% annual management fee.
How does The Cashmere Fund's management fee compare to the industry?
It's worth noting that the industry standard you'll see in the venture capital space is typically a "two and twenty", referring to a 2% management fee and 20% carried interest.
While the typical management fee may be a bit lower than The Cashmere Fund's, the carried interest means the fund sponsor would be taking 20% of the fund's investment proceeds off the top at the back end, even though the sponsor may have a disproportionately lower co-investment in the fund.
It is commonly argued that the carried interest fee structure helps align investor and sponsor interests by creating an incentive to perform, but we believe that incentive already exists inherently in the management fee, because we can grow our revenue not only through the raising of capital but also through growth in the NAV, which will in turn grow the AUM that the management fee is based on. Therefore it's our view that our management fee stacks up quite favorably to the industry standard.
How is the management fee paid?
The management fee is applied pro-rata on a daily basis according to your holding in the fund (in other words, it's netted into the NAV per share, not paid out of pocket).
Under what circumstances could the 2.5% management fee be altered?
The management fee itself can only be increased by a vote of all shareholders.
Are there any expenses outside of the management fee?
Besides the management fee, we will be reimbursed for expenses incurred in operating The Cashmere Fund (e.g. costs related to the Fund's marketing, independent audit, and transfer agent).
The combination of these expenses and the 2.5% management fee is capped at a maximum expense ratio of 5.9% by an Expense Limitation Agreement (ELA) as outlined in the Prospectus. Therefore in a scenario where extraordinarily high expenses in a given year would otherwise exceed that cap, we would waive part or all of its management fee as a benefit for investors.
Under what circumstances could the 5.9% expense cap be altered?
The Cashmere Fund is required by the Prospectus to have an Expense Limitation Agreement (ELA) in place. The ELA, which governs the 5.9% expense cap, can only be amended by a vote of the independent Board of Trustees whose incentives are aligned with the investors in the Fund as they are personally investors in the Fund themselves.
Early redemption fee
Members who choose to redeem shares they have held less than 18 months will also be subject to an Early Redemption Fee, up to a maximum of 2%. Read more here.