[pdq]

This is basically the same as the VC fund model. They get annual carry (ie percentage) on every fund, and then get a percentage of the gains for every exit.

Often this is "two and twenty" (aka 2% annual carry, plus 20% of the gains). Pretty awesome skimming.

[vidarh]

A shocking number of VC's still fail to make much money. The amount of effort to source and manage investments eats up a whole lot of those management fees, and the 20% carry is often after preferential returns up to a certain level and a lot of funds never reach that level.

(I worked for a VC until end of last year; still years of waiting to see if the carry I vested will pay out anything at all)

[meetingthrower]

Carry is the 20 (carried interest) and 2 is the management fee.