BJI Funds is a hedge fund with a value of $110 million at initiation. BJI Funds charges a 2% management fee based on assets under management at the beginning of the year and a 20% incentive fee with a 5% soft hurdle rate, and it uses a high-water mark. Incentive fees are calculated on gains net of management fees. The year-end values before fees are as follows: Year 1: $100.2 million - Year 2: $119.0 million Calculate the total fees and the investor's after-fee return for both years.
BJI Funds is a hedge fund with a value of $110 million at initiation. BJI Funds charges a 2% management fee based on assets under management at the beginning of the year and a 20% incentive fee with a 5% soft hurdle rate, and it uses a high-water mark. Incentive fees are calculated on gains net of management fees. The year-end values before fees are as follows: Year 1: $100.2 million - Year 2: $119.0 million Calculate the total fees and the investor's after-fee return for both years.
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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Explain clearly.
Transcribed Image Text:EXAMPLE: Hedge fund fees
BJI Funds is a hedge fund with a value of $110 million at initiation. BJI Funds charges a 2%
management fee based on assets under management at the beginning of the year and a 20% incentive
fee with a 5% soft hurdle rate, and it uses a high-water mark. Incentive fees are calculated on gains net
of management fees. The year-end values before fees are as follows:
Year 1: $100.2 million
• Year 2: $119.0 million
Calculate the total fees and the investor's after-fee return for both years.
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