A hedge fund currently has assets under management of 585 million. The annual fee structure of this fund consists of a fixed fee of 1.25% of assets under management plus a 20% incentive fee. The fund applies the incentive fee to the gross return each year in excess of the portfolios previous high watermark, which is the maximum fund value in the past two years. The fund is closed to new investors and the maximum value that the fund has achieved in the past two years is 595 million.

Calculate the fee that the manager will earn and discuss your findings if the return on the fund in the coming year turns out to be:

i) 13.5% [5 marks]

ii) 2.0% [5 marks]

iii) 20.0% [5 marks]

Provide your workings and full calculations, when answering this question.