When an LP receives a management or platform fee waiver – either full or partial – the waived amount doesn’t disappear. Instead, it’s re-characterized as investable capital and contributed to the fund alongside the rest of the LP’s subscription. This amount is deployed into deals and treated as part of the LP’s total capital for calculating ownership and distributions.
To reflect this, the LP also receives a notional increase in their capital contributions equal to the waived amount. This ensures their share of any fund proceeds is calculated as if the waived fees had been a direct capital investment all along.
So while the LP still contributes the full amount up front, more of it goes to work in deals rather than toward fees – boosting their exposure and participation in fund returns.