Seeing is believing!

Before you order, simply sign up for a free user account and in seconds you'll be experiencing the best in CFA exam preparation.

Basic Question 8 of 9

Assume that a hedge fund returns 15% in a year net of all fees. Its fee structure is 2 and 20. What are its gross returns?

A. 20%.
B. 20.4%.
C. 21.25%.

User Contributed Comments 5

User Comment
something (1+x) - 0.02(1+x) - 0.2x = 1.15, should give x = 21.79%, assuming management fee and incentive fees are independent.
Salim6 Assume X is the original value.
Gross return = Net return + Fees/X
= 0.15 + 0.02*1,15 + 0.2 * 0.15
= 0.15 + 0.053 = 20.3 %

What's wrong with it pls ?
nsbwong something, tht is exactly what i got as well...
chiodom1 Look at it like this
Gross Return = Net Return + Mgt Fee + Incentive Fee
X = 15 + 2 + .2X
.8X = 17
X= 21.25
3788wuz Salim6: fee is calculated based on gross return
You need to log in first to add your comment.
I am happy to say that I passed! Your study notes certainly helped prepare me for what was the most difficult exam I had ever taken.
Andrea Schildbach

Andrea Schildbach

Learning Outcome Statements

calculate and interpret alternative investment returns both before and after fees

CFA® 2025 Level I Curriculum, Volume 5, Module 2.