Alternative Investments Q62

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 fee structure specifies a hurdle rate of 8% percent and the incentive fee is based on returns in excess of the hurdle rate, what is an investor’s net return?

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Option : C
Explanation : Investor’s return = ($256 - $200 - $12.528) / $200 = 21.74%

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