My issue is not with the 2/20 or 0/30 structure. My issue is with the way they calculate the profit. Hedge fund investors can't liquidate at anytime they wish right? So if they can only liquidate only once a year, wouldn't it be fairer if the profit be based on the profit at the liquidation period?
My issue is not with the 2/20 or 0/30 structure. My issue is with the way they calculate the profit. Hedge fund investors can't liquidate at anytime they wish right? So if they can only liquidate only once a year, wouldn't it be fairer if the profit be based on the profit at the liquidation period? So what are the issues regarding their profit calculation? Most of times. it is calculated based on per quarter or month. The fee structure (0/30) is based on monthly liquidation and monthly fee calculation. If yearly liquidation, fee calculation based on year end performance may be good idea. Any suggestion in fee calculation?
Profit calculation should be based on the profit during the liquidation period. If a hedge fund allows liquidation every quarter, profit calculation should be done quarterly. If they wish to use monthly profit calculation, they should allow monthly liquidation. That, I believe, would be fairer to investors
mgmt fees are usually paid out quarterly as well unless investor does a redemption which most funds allow every month. if investor does a redemption of his funds midquarter, he pays mgmt fee pro rata for that quarter period.
Profit calculation should be based on the profit during the liquidation period. If a hedge fund allows liquidation every quarter, profit calculation should be done quarterly. If they wish to use monthly profit calculation, they should allow monthly liquidation. That, I believe, would be fairer to investors Completely agree with you!
if most funds allow monthly redemption, then the monthly profit calculation method makes sense. Thanks for the info.