Can anyone help with the incentive fee calculation?
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Mgm Fees: 2% of 642 = 12.84
Watermark: 610
Hurdle rate: 4%
Thus, profit for incentive fee: 610 x 1.04 = 634.4
Since it is hard hurdle: 642 – 634.4 = 7.6
Incentive fee: 20% of 7.6 = 1.52
Total fee: 12.84 + 1.52 = 14.36
Net amt to investors: 642 – 14.36 = 627.64
Overall gain = (627.64 / 583.1 ) – 1 = 7.64
Thanks I understand!!
Everything in the sum is common the only catch is that the hurdle rate is calculated on top of the current high water mark.I also did a mistake in this sum ,better write up this small tip.
Yes. This is the main catch. When we calculate the hurdle , we will not take into account the original fund value instead will take the High watermarked value as the hurdle will be now applicable above the watermarked amount.