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TTMAR Hedge Fund has a 15 and 30 fee arrangement with no hurdle rate and an NAV of $200 million at the start of the year At the end of the year before fees the NAV is $253 million Assuming that

TTMAR Hedge Fund has a 1.5 and 30 fee arrangement, with no hurdle rate and an NAV of $200 million at the start of the year. At the end of the year, before fees, the NAV is $253 million. Assuming that management fees are computed on start-of-year NAVs and are distributed annually, find the annual management fee, the incentive fee, and the ending NAV after fees, assuming no redemptions or subscriptions. The annual management fee is simply 1.5% of $200 million, or $3 million. After the management fee of $3 million, the fund earned a profit of $50 million ($253 – $3 – $200). The incentive fee on the profit is $15 million ($50 × 30% = $15). Therefore, the ending NAV after distribution of fees to the fund manager is $235 million ($253 – $3 – $15).

May 15 2020 View more View Less

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