what is the average return on the fund of funds 546443

Suppose a fund of funds invests equally in four hedge funds. The re- turns for three months are listed for the individual funds. Each return is before management fees and incentive fees. Assume for simplicity that each hedge fund charges an annual management fee of 2 percent and an incentive fee equal to 20 percent of returns (after management fees have been deducted). Also, assume that the fund of funds charges a management fee of 0.5 percent annually and an incentive fee of 10 percent of return (after individual fund fees and fund of funds management fee).

Fund A

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Fund B

Fund C

Fund D

1.00%

6.25%

–2.25%

3.12%

2.50%

–4.24%

6.15%

2.40%

3.45%

2.25%

–3.22%

1.65%

What is the average return on the fund of funds?

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