Definition
Subscription Fee
A one-time charge on each LP's commitment at close, usually covering setup and admin costs.
A subscription fee is a percentage taken from each limited partner's commitment when they subscribe, typically to cover the SPV's formation, onboarding, and administration costs rather than to compensate the sponsor for the deal. Charging it per-LP rather than as a flat vehicle cost means the burden scales with cheque size, which smaller investors generally prefer. LPs should read subscription fees as a reduction in invested capital: a 2% subscription fee on a $50,000 commitment means $49,000 reaches the portfolio company while the LP's cost basis considerations are set by the full amount paid. Sponsors should disclose it alongside carry and management fee, since the three together determine the real cost of participating.