Understanding Hedge Fund Fees: Implications for Hedge Fund Managers
K&L GATES
MONTHLY SERIES ACCOUNTING: PROS
AND CONS
Advantages:
Avoids the need for the Equalization Credits and Performance Fee rebate
because each series is essentially treated on a stand-alone basis, irrespective of
the Performance Fees or Loss Carryforwards accrued with respect to other
series.
Eliminates the potential inequity of calculating Performance Fees in the same
manner with respect to Shares issued at different times by calculating
Performance Fees separately with respect to Shares issued at different times.
Each month when new Shares are issued, they are each issued at a nominal
initial value - often $1,000. The Performance Fee is then calculated separately
with respect to each monthly series. At the end of each Performance Fee
calculation period (whether a quarter or a year), Shares above their HWM pay
the applicable Performance Fee, and all Shares are then restated in terms of the
NAV per Share of the longest outstanding series. The HWM per Share
attributable to the longest outstanding series becomes the HWM per Share of the
consolidated series.
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