Question

Sy fund has the following fee structure: 1% management fee based on beginning balance of assets...

Sy fund has the following fee structure:

  • 1% management fee based on beginning balance of assets under management for the year
  • 10% incentive fee with a 5% hard hurdle rate calculated on gains net of management fees using a high‐water mark
  • The hedge fund started the year with a beginning balance of $2 billion, which is the highest value the fund has ever accumulated. The ending values before fees are $1.8 billion and $2.1 billion for years 1 and 2, respectively.
  • What is the net return to the investor in year 2?

Group of answer choices

−11%

15.78%

16.98%

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