Considering that finance types frown upon founders having monopoly control of their companies, why would LP's agree to this sort of structure?
1. Investing in the best funds is competitive for LPs. Top funds often have more demand for investment than the fund will accept, so the partners have greater leverage to dictate terms. It's like an entrepreneur having multiple term sheets.
2. The big bucks come from fund returns, not management fees. In this sense, LPs and partners are highly aligned, since 80% of those returns go to LPs (assuming a 20% carried interest fee - obviously this varies by fund).
Kauffman's portfolio included Bessemer, Benchmark, and General Atlantic, among others. They weren't talking about shady funds.
If you really are expecting to get a giant locked-in chunk of your return from fees, than the interests of partners and the "chief partner" are not necessarily aligned.
For example, if a fund earns $10M in management fees, it would pay back that $10M from the first returns generated by the fund. Then, only after getting "breaking even," would the partners earn carried interest. If the fund doesn't hit that watermark, it loses money for investors.
There are exceptions, though most of the industry has moved this way.
For those who haven't read the report, it's here: http://www.kauffman.org/uploadedFiles/vc-enemy-is-us-report....
Personally, I don't put much weight into it. It's conclusions are heavily skewed by the decade after 2000, which destroyed returns for most investing asset classes. (Despite the report's claims that it covers "20 years" of funds, most charts and examples, esp about mega funds, are recent).