How do wealth managers work with private funds?

This may be a very basic question, but here it goes:

What is the financial arrangement/relationship between a bank's wealth management team and the private funds that they place their client's capital into?

So for example, if a wealth manager convinces a client to invest X amount in a private equity fund or private real estate fund, how does that fund (if at all) compensate the wealth manager for basically fundraising for them?

On the same note, how do wealth managers decide which private funds they offer?

Thanks in advance for any insights! Any primers on the topic would also be super helpful (looked online but cannot find anything really useful).

Comments (4)

Aug 21, 2022 - 6:40am
WSO Monkey Bot, what's your opinion? Comment below:
Aug 25, 2022 - 5:20am
taylor123, what's your opinion? Comment below:

That is really helpful thanks!

So basically:

Step #1: The DD team of the wealth managers will review a fund and decide if they think it is good enough to offer to their clients.

Step #2: The PB / WM will show that product to their clients.

Step #3: If clients like the fund, they invest and the PB / WM charges a placement fee (I am guessing about 1%)?

Step #4: The PB / WM keeps the placement fee, but the fund manager keeps 100% of the ongoing management fee and any performance fees.


I am assuming the DD process of the alternatives team is not much different than that of a sovereign wealth fund or fund of funds shop?

Thanks again!

Aug 25, 2022 - 10:53am
dinganddong15, what's your opinion? Comment below:

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