How to calculate CTA monthly Advisor Fee and monthly percentage performance? Assuming an emerging CTA has the Advisor Fee structure of 0%/10% (0% for management fee and 10% for incentive/performance fee). Further assuming that: 1. 2007-01-01 --- An investor opened a new account with the CTA and deposited $100K into his new account which was managed by the CTA. 2. 2007-01-05 --- The investor withdrew $10k from his account. 3. 2007-01-10 --- The investor deposited $20k into his account. 4. 2007-01-31 --- The account final balance (Net Liquidation Value which includes everything except Advisor Fee) is $200K. QUESTIONS: 1. What is the Advisor Fee for January, 2007? ------ Since the investor deposited $100K, withdrew $10K and deposited $20K, so he invested total of $100K - $10K + 20K = $110K. At the end of the month, the account balance (before fee) is $200K, so he made (before fee) $200K - $110K = $90K for the month. So the Advisor Fee will be $90K * 10% = $9K which will be deducted from (and posted to) his account next month (February, 2007). Is this calculation correct? 2. What is the monthly percentage performance for January, 2007? --- a. Since the investor made $90K (before fee) but there is $9K Advisor Fee to be charged (posted) in next month, so his net gain for January is $90K - $9K = $81K (after fee). But he invested $110K in January, so his return will be $81K/$110K = 73.64%. --- This method may be incorrect (too simplify), since the investor did not deposit $110K all together on 2007-02-01. b. The method (a) in above is incorrect, since the investor had additional deposit and withdraw during the month, it breaks the month into 3 periods: (from 2007-01-01 to 2007-01-05) & (from 2007-01-05 to 2007-01-10) & (from 2007-01-10 to 2007-01-31), we need to calculate the return for each and all three periods independently. Assuming the return for three periods are r1%, r2% and r3%. The month return will be ((1+100*r1) * (1+100*r2) (1+100*r3) -1) * 100 = R%. But this method is complicate, since we need to know the end value of each period and need to take the Advisor Fee into consideration for each period. If non of (a) and (b) in above is correct, what is the correct method to calculate monthly percentage performance? Please advice. Thanks.

would be nice to have an excel sheet calculator for this and high water mark calculations -- anybody ?

I used to think so too. I bought one for something like 30 dollars, from an outfit called Roman Technology. But I only fiddled around with it a few times the first couple of days, and then never used it again. Ultimately I threw it away when migrating from the old laptop to the new one. I've no idea what the going price is now, probably more than $30 though.

Easy to do by hand. Measure your assets and performance by a "NAV" like the mutual funds do. Performance fees are due only when the NAV reaches a new high water mark. Example... Your NAV is $100 at the start of a period. At the end of that period, it's $110 before fees. If you are due 20% performance fee, then you get 20% of the $10 increase, or $2. The new NAV after payment of performance fee becomes $108 for the start of the next period.

The answer is.....you place strict rules on when your investor can withdraw and deposit funds, typically at months end once the books have been closed. This leaves the investor exposed to additional losses so you put a provision in there that states the investor can withdraw any amount <i>before</i> months end after a decline of X. Calculating something like you presented for an individual account isn't that bad but what if you manage multiple accounts, or worse yet, have pooled accounts?