A hedge fund launched with assets of $500,000. It has a high water mark of $500,000 and charges a 15% incentive fee.
At the end of year one, the fund was down 5%. At the end of year 2, the fund was up 10%.
What incentive fee, if any, did the fund charge at the end of year 2?
The fund does not have a hurdle rate.
a. Zero
b. $75,000
c. $3,375
d. $7,500