Alternative Investments Q46

46Zee 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-of-period valuation.
The fund value declines to $250 million in the second year. Assuming the fee structure is the same as given in the information above but is inclusive of a high water mark, which of the following is most likely to be the fees earned by Zee Capital in the second year?

Option : A
Explanation : Management fee = 250 x 0.04 =10, because the fund declined in value, there is no incentive fee.

Forgot your password?

I agree with the Terms.