The current high water mark is $66 and net asset value of a hedge fund is $62. If the Black-Scholes value of a call option is $11.50 and the incentive fee is 20%, then what is the value of the incentive fee?

Here are data on three hedge funds. Each fund charges its investors an incentive fee of 20% of total returns. Suppose initially that a fund of funds manager buys equal amounts of each of these funds and also charges its investors a 20% incentive fee. For simplicity, assume also that management fees other than incentive fees are zero for all funds.

 What is the value of the incentive fee for the fund of funds if the funds of funds has a 300 initial AUM?

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Hedge Fund 1 Hedge Fund 2 Hedge Fund 3 100 100 AUM (initial) 100 Gross return 12 (%) 13 14 Hedge Fund 1 Hedge Fund 2 Hedge Fund 3 100 100 AUM (initial) 100 Gross return 12 (%) 13 14

Answer rating: 100% (QA)

For the first part of the question we need to calculate the performance fee for the hedge fund The p... View the full answer