A $560m hedge fund has a 1% management fee, 0.23% in other expenses, and a 15% incentive fee. The Fund borrows $440m at 9.6% interest and then earns a 13.9% gross return. What is the $ incentive fee and the net return to LPs if there is $7m of GP capital?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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A $560m hedge fund has a 1% management fee, 0.23% in other expenses, and a 15% incentive fee. The
Fund borrows $440m at 9.6% interest and then earns a 13.9% gross return. What is the $ incentive fee and
the net return to LPs if there is $7m of GP capital?
Transcribed Image Text:A $560m hedge fund has a 1% management fee, 0.23% in other expenses, and a 15% incentive fee. The Fund borrows $440m at 9.6% interest and then earns a 13.9% gross return. What is the $ incentive fee and the net return to LPs if there is $7m of GP capital?
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