The $200 million AUM fund described earlier could therefore base its annual revenue projections around its $3 million management fee (., of AUM) and set its expense caps accordingly. Dur- ing a strong-performing year the fund will run with a surplus which, like other businesses, it can use for capital expenditures, incentive bonuses, cash reserves and so forth. A start-up fund can apply the same principal based on realistic AUM assumptions. (For most funds, “re- alistic” start-up capital consists of investments by partners, friends and family.) A fund with $20 million in start-up capital and a and 20 arrangement could.
