We develop a unified theory of delegated capital management by extending the paradigm of Berk and Green (2004) from mutual funds to alternative assets. With competitive markets and rational investors, we derive the optimal contract and account for observed regularities – performance fees, persistent alpha, and limits on capital. The key distinction between mutual funds and alternatives is the liquidity of the underlying assets. When assets are illiquid, it is optimal to acquire information about the manager’s skill. A positive alpha is therefore necessary to compensate informed investors and a performance based contract is required to induce these investors to allocate their capital optimally. At the same time, a free-rider problem emerges that requires capital constraints on uninformed investors. Thus, liquidity of the underlying assets explains the contrasting contract structures across sectors.