You manage a hedge fund with $400 million in assets. Your fee structure provides for a 1% annual management fee with a 20% incentive on returns over an 8% benchmark. If the fund value is $445 million at the end of the year, what is your fee?

Question

Quizplus · Accepted Answer

$400,000,000 × 0.01= $4,000,000
$400 million × .08 = $32 million
(445 - 400) - 32 = $13 mil × .20 = $2.6 million
Total Fee = $4 million + $2.6 million = $6.6 million

You Manage a Hedge Fund with $400 Million in Assets