You manage a hedge fund with $300 million in assets. Your fee structure provides for a 1% annual management fee with a 20% incentive on returns over a 12% benchmark. If the fund value, before fees, is $345 million at the end of the year, what is the net return to the investors?

Question

Quizplus · Accepted Answer

$300,000,000 × 0.01= $3,000,000
$300 million × .12 = $36 million
(345 - 300) - 33 = $9 mil × .20 = $1.8 million
Total Fee = $3 million + $1.8 million = $4.8 million
Investor value at end of year = $345 million - $4.8 million = $340.2 million
Net return = 40.2 / 300 = .134 or 13.4%

You Manage a Hedge Fund with $300 Million in Assets