Will either FF or SA charge an incentive fee in this scenario? Why then does the investor in FF still do worse than the investor in SA?

17. Here are data on three hedge funds. Each fund charges its investors an incentive fee of 20% of total returns. Suppose initially that a fund of funds (FF) manager buys equal amounts of each of these funds, and also charges its investors a 20% incentive fee. For simplic- ity, assume also that management fees other than incentive fees are zero for all funds. Hedge Hedge Fund 1 Fund 2 $100 $100 Hedge Fund 3 $100 Start of year value (millions) Gross portfolio 20% 10% 30% rate of return