How do hedge funds take there performance fee on unrealized gains?
Lets say a hedge fund has $1,000,000 in unrealized gains at the end of the year and the fund charges 20%, how does it take them?
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about 11 months ago
They will probably allocate $200K from the client accts to themselves.
about 11 months ago
I believe they mark-to-market based on pre-established formulas hopefully computed by the hedge fund administrator and not the hedge fund itself. This gets tricky if assets are illiquid in a thinly traded market. Hedge funds usually spell all of this out within their investment mandate, ppm so investors know how it will be done upfront.
Here is my article on hedge fund fees: http://richard-wilson.blogspot.com/2008/01/hedge-fund-fees.html
- Richard
Richard Wilson
Hedge Fund Group (HFG)