Hedge fund fees

In the heyday of the hedge fund world, which lasted approximately from the mid-1990s to the financial crisis of 2007/8, most hedge fund managers were able to maintain a generous fee structure that paid the manager 20% of fund gains above a zero return, plus an annual 2% fee (‘2 and 20’); most alternative funds today pay for gains above a non-zero hurdle, normally the so-called risk-free rate (short-term interest rate) – although today the risk-free rate is close to zero. A typical hedge fund opening today would carry fees of anywhere between ‘2 and 20’ to ‘1 and 10’, depending on asset class and credentials.

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