A $560m hedge fund with a 1% management fee, 0.23% in other expenses, and a 15%incentive fee earns a 1.9% gross return. What is the $ incentive fee and the net return to LPsif there is $7m of GP capital?

To calculate the incentive fee and net return to LPs, we need to first determine the fund's net…

Answered: A $560m hedge fund with a 1% management…

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

Section: Chapter Questions

Problem 1PS

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A $560m hedge fund with a 1% management fee, 0.23% in other expenses, and a 15% incentive fee earns a 1.9% gross return. What is the $ incentive fee and the net return to LPs if there is $7m of GP capital?