Understanding Hedge Fund Fees: Implications for Hedge Fund Managers
K&L GATES
PARTNERSHIP ACCOUNTING
Partnership accounting is completely fair accounting
because the accounting for each partner's capital
account is processed irrespective of the accounting for
any other partner's capital account.
Profits and losses are allocated pro rata among the cash
capital account balances (Gross Asset Value, not NAV)
and the Performance Fees then calculated separately
with respect to each partner. While certain funds
distinguish different capital contributions made by
partners for lock-up purposes, very few do so for
Performance Fee calculation purposes.
Issues in partnership accounting relate solely to the
calculation of the Performance Fee - not the allocation of
Performance Fees among different investors - each
investor effectively having its own discrete
Performance Fee.
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