The Anatomy of a Hedge Fund: Fund Fees and Expenses Explained

Hedge funds draw breathless coverage for their sizable investments as well as their larger-than-life personalities. These optics attract top talent to join the elite Alpha-generators. But few young professionals aspiring to become great hedge fund analysts fully understand the business behind the brand.

How does a $500m AUM fund make money and how much of that is spent on keeping the lights on? How much is expected to be allocated towards employee bonuses on any given year?

In this piece we unpack the economics, structure, and key considerations behind the running of a successful enterprise.

What you'll learn

  • Keeping the lights on - How Hedge Funds function and what it takes to run a sustainable HF operation
  • Fee Structures - How Hedge Funds make money from LPs and how incentives work relative to traditional money managers
  • Clawbacks and The Like – It’s not just 2 and 20, fee structures are nuanced. Learn how the structure has evolved and why different investors can expect to pay different fees even in the same vehicle.
  • Breakdown of cashflows – How a $500m AUM fund splits their revenue stream between operating expense and compensation to their employees.
The Anatomy of a Hedge Fund: Fund Fees and Expenses Explained

The Anatomy of a Hedge Fund: Fund Fees and Expenses Explained

Hedge funds draw breathless coverage for their sizable investments as well as their larger-than-life personalities. These optics attract top talent to join the elite Alpha-generators. But few young professionals aspiring to become great hedge fund analysts fully understand the business behind the brand.

How does a $500m AUM fund make money and how much of that is spent on keeping the lights on? How much is expected to be allocated towards employee bonuses on any given year?

In this piece we unpack the economics, structure, and key considerations behind the running of a successful enterprise.

What you'll learn

  • Keeping the lights on - How Hedge Funds function and what it takes to run a sustainable HF operation
  • Fee Structures - How Hedge Funds make money from LPs and how incentives work relative to traditional money managers
  • Clawbacks and The Like – It’s not just 2 and 20, fee structures are nuanced. Learn how the structure has evolved and why different investors can expect to pay different fees even in the same vehicle.
  • Breakdown of cashflows – How a $500m AUM fund splits their revenue stream between operating expense and compensation to their employees.
The Anatomy of a Hedge Fund: Fund Fees and Expenses Explained