Understanding Hedge Fund Fees: Implications for Hedge Fund Managers
K&L GATES
THE SIMPLEST WAY
The simplest means of accounting for Performance Fees is to treat the
Fund itself as the client and ignore the individual investment experience
of investors.
An "overall fund" Performance Fee has the obvious unfairness for
investors with Loss Carryforwards being diluted by new subscriptions
being accepted that are not subject to Performance Fees until the
Fund's overall Loss Carryforward has been earned back. In addition,
when Shares are acquired at a price reduced by the accrued
Performance Fee and subsequent losses reduce the Performance
Fees, the existing investors are subject to economic dilution because
they share the Performance Fee reversal with the new Shareholders,
whereas in fact the reversal should have been allocated only to the
Shareholders that were invested in the Fund when the Performance
Fee accrued.
klgates.com
15View entire presentation