Understanding Hedge Fund Fees: Implications for Hedge Fund Managers

K&L GATES WHAT DOES THIS MEAN FOR FEE LEVELS AND STRUCTURES? Typical fee structure of 2%/20% with high water mark and no clawback: Can this be maintained? 2020 management fee rate average for new funds was 1.27%; existing funds 1.37% Carry is meaningless for many funds in the short term because they are below water; management fee base is sole support for the firm. This increases attractiveness of new money, which can often negotiate lower carry rates. Q: are any of your fund's new investors trying to buy out existing investors rather than subscribing to get the benefit of existing high water marks? + + i klgates.com 5

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