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Consider a hedge fund with $100 million at the start of the year. The benchmark S&P 500 Index was up 20% during the same period.

  1. Consider a hedge fund with $100 million at the start of the year. The benchmark S&P 500 Index was up 20% during the same period. The gross return on assets is 30%, and the expense ratio is 1%. For each 1% above the benchmark return, the fund managers receive a 0.2% incentive bonus.

  1. Figure out the management cost ($) based on the end-of-year balance.

  1. Figure out the annual return (%) based on the end-of-year balance.

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