A closed-end timber fund PPM against a direct tract purchase, where the fee stack eats the premium

Silence on a fee schedule after asking once is normal. Silence after asking twice in writing is the answer. The control point is the one worth sitting with longest. The harvest deferral option is often the real appeal of timber, and a closed-end fund structure takes it and hands it to a manager whose fund life ends on a fixed date. A manager facing a wind-up in a soft market has an incentive to cut, or to sell tracts into whatever bid exists. A direct tract lets the owner wait ten more years if conditions call for it. That is not a small difference, it is the difference between owning the option and paying someone else to hold it.

Structure and documents are what to actually read, so a few clauses worth finding before deciding anything about the fees. The extension mechanism. Two one-year extensions at whose discretion, GP alone or with advisory committee consent, and what happens if the assets still haven't sold at year twelve. Some documents allow in-kind distribution, some allow a further extension by LP vote, some contemplate a sale to an affiliate or successor vehicle, which is where the conflicts process matters. The fee basis switch. Management fee on committed capital during the investment period and invested capital after is standard, but read the definition of invested capital and whether it steps down on realizations or stays at cost basis. Those two definitions produce very different total fee dollars over twelve years. Affiliate fees. "Market rates" with no schedule and no cap is the clause worth pushing hardest on. Ask whether affiliate compensation is included in or excluded from the preferred return calculation, and whether there's an annual disclosure of affiliate payments to LPs. And the carry. 20 over an 8 with a catch-up means the GP takes 100 percent of profits above the pref until it's caught up to 20 percent of total. On a mid single digit gross outcome, an LP may pay full management fees and receive under the pref while the GP receives everything except carry. That's the scenario the marketing deck never models. Whether any of this fits a given situation is a question for counsel and whoever handles the tax work. But asking for a prior fund's net-of-everything numbers and the affiliate schedule in writing is an ordinary request, and a manager who won't answer it is telling an investor how the next twelve years of information flow will go.