How Are Hedge Fund Expenses Different from Mutual Fund Expenses

question 62

Essay

How are hedge fund expenses different from mutual fund expenses? What are hurdle rates and high water marks at a hedge fund? Why are these used?

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Definitions:

Cash Flows

The net amount of cash and cash-equivalents being transferred into and out of a business, measuring financial health.

Initial Cost

The acquisition cost of an asset or investment, covering all expenses involved in making the asset operational, including purchase price, installation, and setup.

Payback Period

The time required for an investment to generate income or profits equal to the original cost of investment.

Capital Budgeting

The process of evaluating and selecting long-term investments that are in line with an organization's strategic goal.