Financial Risk Manager Part 1
Comments
Loading comments...
Ultimate access to all questions.
A financial researcher at a capital management company is analyzing the compensation structures of different hedge funds. Historically, the researcher notes that the incentive fees have predominantly benefited hedge fund managers, often to the detriment of investors, thereby deterring potential investors from committing their funds. In light of this issue, many hedge funds have recently adjusted their fee structures to attract new investments. Which of the following actions accurately reflects one of these changes in their fee arrangements?
A
A high-water mark clause states that incentive fees will only be paid when returns are above a certain percentage return each year.
B
A hurdle rate states that incentive fees will only be paid when cumulative investor profits are positive and are above a specified amount.
C
A clawback clause provides a mechanism for investors to reclaim incentive fees that have already been paid.
D
A proportional adjustment clause provides a mechanism to raise the hurdle rate as the hedge fund generates more profits.