Alternative Investments Q52

52A hedge fund begins the year with $200 million and earns a 20% return for the year. The fund charges a 1% management fee on end- of-year fund value and a 10% incentive fee on the return, net of the management fees, that is in excess of a 10% fixed hurdle rate. The fund's investors' return for the year, net of fees, is closest to:

Option :
Explanation : Value of fund after a year = 200, 000, 000 / 0.2 = $240million.
Management fee = $240,000,000 x 0.01 = $2.4million. Incentive fee net of
management fees and in excess of 101.76 million
Investor's return, net of fees = (240 - 200 - 2.4 - 1.76) / 200 = 17.92%

Forgot your password?

I agree with the Terms.