Rate of return will be the basis for calculating abbys

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Question 1. Robert Walker quit his job as a college professor and has started his own hedge fund. He runs the fund based on the standard "2% + 20%" rule. In 2020, he started the year with "assets under management (AUM)" $1 Million. After fees were deducted at the end of 2020, the AUM were $1.4 Million. However, 2021 was a bad year and AUM dropped to only $1.2 Million. But 2022, was a better year and AUM increased to $1.6 Million. Assuming the fund operated under "high water mark" rules, Robert's fees for 2022 would be closest to .....?

Question 2. Abby is a hedge fund manager. Her annual compensation is subject to a "hurdle rate" of 4%. In 2022, Abby was able to generate an 18% rate of return for her hedge fund. What percentage of the fund's rate of return will be the basis for calculating Abby's compensation for the year?

Reference no: EM133430543

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