Explanation

The correct answer is A (€6.8 million). Here's the breakdown:

1. End-of-Year AUM Calculation:

   • Beginning AUM: €200 million
   • Annual return before fees: 15%
   • End-of-year AUM before fees: €200 million * 1.15 = €230 million

2. Management Fee:

   • 1.5% of €230 million = €3.45 million

3. Incentive Fee Calculation (Net of Management Fees and Hard Hurdle Rate):

   • Hard hurdle rate: 5% of €200 million = €10 million
   • Net AUM for incentive fee: €230 million - €200 million - €3.45 million - €10 million = €16.55 million
   • Incentive fee: 20% of €16.55 million = €3.31 million

4. Total Fees:

   • Management fee + Incentive fee = €3.45 million + €3.31 million = €6.76 million ≈ €6.8 million

Why not B or C?

• B (€7.5 million) incorrectly calculates the incentive fee gross of management fees.
• C (€8.8 million) excludes the hard hurdle rate in the incentive fee calculation.