most of the hedge fund has 2 and 20 fee structure and fund of fund has one and 10 fee structure. Over a long investment horizon compared to net return investing directly in hedge funds net returns from investing in funds of funds are most like to:
lower
higher
same
SOLUTION SAYS - LOWER
but the 1 & 10 will give higher return than 2 & 20 hedge fund. am i right to i understood the question wrong?
The fund of funds sits on top of the hedge funds.
The fund of fund has to pay the hedge fund performance fees and then you pay fees for own the fund of funds on top of that.
You > fund of funds > hedge funds
As an investor you are exposed to both sets of fees.
so as in i did not understand the question they are comparing 2 & 20 fee structure to 1 & 10 fee structure?
or direct investing to fund of fund investing
direct investing to fund of fund investing
Okay