Alternative Investments Q59

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. If the incentive fee is calculated based on return net of the management fee, the fees earned by SHM is closest to:

Answer
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Option : B
Explanation : Management fee = 256million x 0.03 = $7.68million.
Incentive fee = ($256– $200– $7.68)million ∗ 0.15 = $7.24million. Total
fees to SHM Capital =14.928 million

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