Consider a Hedge Fund with $200 Million at the Start

Consider a hedge fund with $200 million at the start of the year. The benchmark S&P 500 index was up 16.5% during the same period. The gross return on assets is 21% and the expense ratio is 2%. For each 1% above the benchmark return the fund managers receive 0.1% incentive bonus. Using the management cost calculated, what was the annual return on this fund?

A) 16.50%
B) 18.04%
C) 18.55%
D) 21.00%

Correct Answer:

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