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Due Diligence FAQs

How should the performance fees or carried interest be calculated?

These fees should reflect the long-term performance of the fund and should only be realized when the performance exceeds an established and constant high-watermark or hurdle rate.

Anything else is probably too generous for a manager and may lead to a lack of intent towards better performance, especially when management fees are high or large due to amounts of assets under management, which benefits the manager but not the investor.

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