Belongs to alternative - regulatory comoensation trading
R: accredited standards, like 250000 above, of 1million or more after financial crisis net worth
C: offer them based on how much they earn from client
T: use leverage, so can take long (buy) or short (sell), can do whatever you want with the money
After 2001
Classification
Not fixed classification
Futures funds
Event driven
Relative value (arbitrage = riskless)
Equity
Funds of funds
1st 4 are named single manager funds, underlying investments that do not invest in another hedgefund
last F: invest in a diversified groups of funds
fund mortality – no of hedgefunds that …. average lifespan of hedgefund – 4.4 years
hedgefund fees***** management fees: collected regardless of fund performance, usually 2% drawn from customer, take reference to the initial year performance fees: incentive fees, eg. Beyond a certain level of money earned, I will draw a % of about usually 20% of the profit.
Usually called: two-twenty fees
Forprotection:
You need to
- achieve a high watermark provision – only pay fees only if net asset value increases from previous year. (have profit then have incentive) (only when you exceed the highest value of record like a high score, must break high score
- hurdle rate: fee paid if the fund return exceeds a particular threshold
example: to calculate the performance fee, must minus management fee first then take the percentage
250million increase to 295million
2/25 fee structure
management: 2% of 250m performance: percentage returen
high watermark: effects of incentive fee: result in pervase incentive motivate the manager by putting his interest alighned to invetor’s interest: eg. Manager want volatitlity but investor don’t want
