A fee step-down lowers the management fee once the investment period ends, often by moving the base from committed capital to the cost of what's still held.
What the film says
In private equity, a fund's fee can fall by more than half. That's the fee step-down. Say a fund charges two percent on one billion committed. That's twenty million a year. When the investment period ends, the base changes. Now it's one point five percent on the six hundred million still invested. That's nine million. So why do investors care? Funds can hold assets for years after they stop buying. That's where later fees are set. Read what the fee is charged on, not just the percent.
In the glossary: Fee step-down
A simple example with round numbers, not advice. Terms vary by fund.
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