Alignment between LPs and GPs in private real estate funds generally functions, but is structurally imperfect, with fees widely viewed as the central source of misalignment. Traditional management fee models reward scale and capital deployment rather than realized performance, creating competing priorities that become most visible in weaker markets. Over time, management fees have evolved from cost-recovery tools into profit centers, allowing GP platforms to succeed financially even when funds underperform. Smaller managers often offer more LP-friendly terms and greater flexibility, while large platforms retain fee-setting power through brand, scale and fundraising momentum. Alternative alignment tools such as carried interest, governance rights and co-investment are commonly assumed to be effective but, in practice, provide limited constraint on GP behavior. Valuation discretion further weakens alignment by allowing appraisal lag and inconsistent write-down timing, which distorts t
