Asked by Lizbeth Garza on Jul 15, 2024
Verified
The typical hedge fund fee structure is
A) a management fee of 1% to 2%.
B) an annual incentive fee equal to 20% of investment profits beyond a stipulated benchmark performance.
C) a 12-b1 fee of 1%.
D) a management fee of 1% to 2% and an annual incentive fee equal to 20% of investment profits beyond a stipulated benchmark performance.
E) a management fee of 1% to 2% and a 12-b1 fee of 1%.
Hedge Fund Fee Structure
The compensation arrangement between hedge funds and their managers, typically involving a management fee plus a performance fee based on the fund's returns.
Management Fee
A charge levied by an investment manager for managing an investment fund's portfolio of securities.
Incentive Fee
A fee charged by hedge funds equal to a share of any investment returns beyond a stipulated benchmark performance.
- Comprehend the structure of hedge fund fees, including management and incentive fees.
Verified Answer
CA
Cassandra AbarcaJul 19, 2024
Final Answer :
D
Explanation :
The typical hedge fund fee structure includes a management fee of 1% to 2% of assets under management and an annual incentive fee equal to 20% of investment profits beyond a stipulated benchmark performance, often referred to as the "2 and 20" structure.
Learning Objectives
- Comprehend the structure of hedge fund fees, including management and incentive fees.