Alternative Investments Q44

44Zee Capital, a hedge fund with an initial investment capital of $200 million had a 40% return in its first year. At year end, a 4% management fee is charged based on the assets under management and a 10% incentive fee is charged. The management fee is calculated using end-ofperiod valuation. Given that the incentive fee is calculated based on return net of management fee, which of the following is most likely to be the total fees earned by Zee Capital?

Option : B
Explanation : Management fees = 200 x 1.4 x 0.04 = 11.2
Incentive fees = (200 x 1.4 – 200 – 11.2) x 10% = 6.88
Total Fee = 11.2 + 6.88 = $ 18.08

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