Hi In X assignment X.4.3 there is a question about performance fees. I looked at the calculation and do not understand how the performance fees are calculated. Can anyone explain the table in the solutions? e.g how is £648,000 calculated for the first perf fee? thanks
Hi, This is one of the assignment questions that is actually a past paper question. The person writing the question I suspect knows how these things are typically calculated in reality. The outperformance in the first quarter is 3% (difference between 5% and 8%) and the fee is 10% of that (ie 0.3%). The 0.3% outperformance is applied to the "end" fund value (although I suspect not many marks would have been lost if you didn't know that and applied it to the start value). So you get 0.3% * 216,000,000 which is 648,000.
