Deck 2 – Performance & Returns

Why can standard deviation understate the true risk of many alternative investments?

Returns are smoothed by appraisal-based pricing, masking real volatility.

How does a soft hurdle differ from a hard hurdle once the hurdle is met?

Soft applies the incentive fee to total profits, not just excess.

In a "$2$ and $20$" structure, what does the "$2$" represent?

A $2\%$ management fee on assets.

In a "$2$ and $20$" structure, what does the "$20$" represent?

A $20\%$ performance fee on eligible profits.