2% Management fee, annualized and payable monthly

What does this mean?

I have never been worthy enough to manage OPM and get a management fee (once I was a CTA but only got an incentive fee).

Say I have $10,000,000.00 to manage but I get steady progress in the system. So its like this:

Jan $10,000,000.00
Feb $11,000,000.00
Mar $12,000,000.00
Apr $13,000,000.00
May $14,000,000.00
Jun $15,000,000.00
July $16,000,000.00
Aug $17,000,000.00
Sep $18,000,000.00
Oct $19,000,000.00
Nov $20,000,000.00
Dec $21,000,000.00

So annualized does this mean to add all these up and divide by 12 then multiply by 2%?

$186,000,000.00/12=$15,500,000.00*2%=$310,000.00/12=$25,833.33 per month?


But wait...

If it is paid monthly then there must be that deduction made each month from the above monthly balances.

Am I getting this right?

Michael B.

 

Don't worry ET, you have not lost Electric...he is just dreaming!

Wifey

 

It would probably be done as 0.1667%/month of the ending balance.

 

I know a fund that does 2% in the beginning of the year, so $200k, than 20% of all profits above x%. So lets say 10%, 21,000,000 would be a 105% gain, so 105-10%=95%*.2%, so 20% of 95%. so 11,000,000 profit-1,000,000 (10% of initial fund) so 20% of 10,000,000 or 2,000,000. I might be wrong because I just rushed, but something to that degree.

 

I think it will look like this:

 

I made an error: the 20% incentive fee was calculated as 5% per quarter, which is wrong. The 20% stays 20% on te profit of the quarter. So this is the correct version.
So te manageùent fee would be 290,032.40 $ and the incentive fee would be 2,341,993.52 $

 

Quarterly in advance is typical, always in advance though. Incentive fee is once per year at the end of the year. Regardless of how fee's are taken, you report to each investor monthly with NET performance. So the management fee, incentive fee, and all expenses born by the fund are ammortized on a monthly basis and each investors monthly account statement shows his PnL net of these expenses.

 

Hey,

Just what I needed but did not want to ask...Thanks for the spreadsheet, now I do not need to build it...Great Spike.

Is this considered a standard deal? I suppose there can be many twists and turns to it, such as KevinK posted.

Michael B.

 

So basically it is a "rolling in advance" estimation, all leveled quarterly, with a final at the end of the year?

Investors see the NET...this answered another question thanks!

Michael B.

 

Is the net asset value used...How are open trade treated?