Understanding Hedge Fund Fees: Implications for Hedge Fund Managers

K&L GATES HERE'S WHERE, THE PROBLEM STARTS.... How fees once calculated should be allocated among investors is primarily a matter of arithmetic. ■ ◉ Fairest result: Performance Fee paid by each investor reflects the investment experience of that investor - the problem is doing so while maintaining a uniform NAV per Share. Performance Fees should be allocated based on the performance of each individual investor's investment. That is the "automatic" result in partnership accounting. ■ Offshore, beneficial interests in funds are quantized into "Shares," there is an archaic affinity for having all Shares - or at least Shares issued at the same time - have an equal value. (But- why have shares at all since they don't trade?) klgates.com 12

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