Hedge fund managers are compensated by ________.

A) deducting management fees from fund assets and receiving incentive bonuses for beating index benchmarks
B) deducting a percentage of any gains in asset value
C) selling shares in the trust at a premium to the cost of acquiring the underlying assets
D) charging portfolio turnover fees

Hedge fund managers typically deduct management fees (usually around 2%) from the fund's assets under management, which is how they collect a fee for their services. In addition, they may receive incentive bonuses for outperforming index benchmarks, which can be a percentage of the fund's profits above a certain threshold.

B, C, and D are not typically how hedge fund managers are compensated. Deducting a percentage of gains in asset value (B) is known as a performance fee and is usually collected in addition to a management fee. Selling shares at a premium (C) is more commonly associated with closed-end funds, and portfolio turnover fees (D) are not common in the hedge fund industry.