Two and twenty is market shorthand, not an ILPA rule

The record

In June 2019 the Institutional Limited Partners Association (ILPA) published the third edition of its own Principles, the LP trade body's guidance for structuring a private fund. One section, 'GP and Fund Economics,' addresses fees, carried interest, clawbacks and fee offsets. ILPA's own Principles 3.0 page, as retrieved on 16 September 2026, describes seven guidance topics built around 'alignment of interest, governance, and transparency.' Its definitions state a management fee 'is typically charged as a percentage, e.g., 1-2%, of committed or invested capital.' Separately, the National Venture Capital Association's 2026 Yearbook data pack records the largest US venture fund raised to date at $4,600.0 million, closed April 2025.

What the sources establish

ILPA's document defines a management fee and carried interest and how each should be calculated. It does not fix a '20%' carry or a '2%' fee as a standard; the only number in its own definitions is the fee range, '1-2%.' Carried interest, by ILPA's own definition, is 'an agreed share of the profits resulting from the realization of an investment,' payable once investors recoup their original investment plus a hurdle rate if one applies — a mechanism, not a fixed percentage. 'Two and twenty' is convention repeated by participants, not a rule any association enforces. Combining ILPA's fee range with the yearbook's largest-fund figure is instructive: 2% of a $4.6 billion fund is $92 million a year in fees alone, before any carry, which is one reason ILPA's Principles argue fees should track operating costs rather than a round number, and ask a first-time fund's general partner to justify its proposed fee with a budget.

Scope and revision

ILPA's Principles are voluntary, negotiated fund by fund, not a regulation; they bind no general partner who has not agreed to them in an LPA. This is the third edition since 2009, so this reflects the document as retrieved on 16 September 2026. The $4.6 billion figure is one outlier among the more than 500 US funds the data pack shows closing in 2025, whose median size that year was $26 million, a gap of more than 175 times.

The decision in front of you

Editorially: a founder, a fund's employee-investor, or a co-investing angel cannot look up a fund's exact fee and carry terms in any filing; those sit in the LPA, disclosed to LPs, not published. ILPA's Principles instead supply a checklist for disciplined terms — carry on net profits after expenses, a hurdle before it accrues, a clawback with escrow reserves, and fees that step down on a follow-on fund.

• Is a quoted management fee charged on committed capital, invested capital, or a blend, and does the rate change over the fund's life?
• Is carried interest calculated on net profits after fund expenses, and is a hurdle rate stated before it accrues?
• Is there a clawback provision with an escrow reserve, and who is responsible for enforcing it?

'Two and twenty' describes where the market has tended to settle, not a rule any association writes into force — a reason to read a fund's own formation documents against ILPA's questions, rather than assume the shorthand.