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An institutional investor is comparing management fees for two competing real estate investment funds. Both funds expect to begin operations and are accepting capital commitments.

An institutional investor is comparing management fees for two competing real estate investment funds. Both funds expect to begin operations and are accepting capital commitments. When the funds begin acquiring properties, capital calls will be made for capital contributions during the investment period. Fund A will charge a fee of 45BP on capital committed and 60BP on capital invested after the investment period ends. Fund B will charge a fee of 50BP on capital committed and 55BP on capital invested after the investment period ends. Both funds expect to have $507,000,000 in capital commitments when the fund commences operations and both project a five-year cycle for startup and acquisitions. Capital flows are expected as follows:
\table[[Fund A,\table[[Contributed],[Capital]],\table[[Capital],[Returned]],Invested Capital],[Year 1,$202,800,000,$0,$202,800,000
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