Alternative Investments Q9
0. Which of the following is least likely to be based on realized profits for a funds’ structure?
- Option : B
- Explanation :
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A. Incentive fee – This is typically based on realized profits or performance. It’s a reward for the fund manager when returns exceed a benchmark or hurdle rate.
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B. Management fee – This is usually a fixed percentage of assets under management (AUM) and is charged regardless of performance. It is not based on realized profits, making it the correct answer.
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C. Performance fee – Like the incentive fee, this is also based on fund performance, often tied to realized gains or exceeding certain benchmarks.
Correct Answer: B. Management fee
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