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%