In the below question, there is no mention of the performance fees net of the management fee, could anyone help me to advise what am I missing? The answer considers the performance fees net of management fees.
SHM Capital is a hedge fund with USD200 million of initial investment capital. They charge a 3% management fee based on assets under management at year-end and a 15% incentive fee. In its first year, SHM Capital has a 28% return. Assume management fees are calculated using end-of-period valuation.
If the fee structure specifies a hurdle rate of 8% and the incentive fee is based on returns in excess of the hurdle rate, what is an investor’s net return?
Thanks very much!