Deconstructing Management Fees In Alternative Funds

Without a doubt, money is the primary driving factor in private equity and hedge funds. Lucrative fees are paid to talented fund managers by investors eager to earn high returns on their investments. Although much attention is paid to the 20% incentive allocation paid to successful managers, either in the form of “carried interest” for private equity funds or “performance fees” for hedge funds, management fees can provide for substantial revenue streams, especially as these funds grow bigger and bigger.