Alternative Investments Q58

0. SHM Capital is a hedge fund with $200 million of initial investment capital. They charge a 3 percent management fee based on assets under management at year-end and a 15 percent incentive fee. In its first year, SHM Capital has a 28 percent return. Assume management fees are calculated using end-of-period valuation. What is an investor’s effective return if the incentive and management fees are calculated independently?

Answer
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Option : B
Explanation : Investor return = ($256 - $200 - $16.08) / $200 = 19.96%

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