What percentage range is typical for performance fees in hedge funds?

In the hedge fund industry, performance fees are a key component of the fee structure, incentivizing managers to deliver superior returns. The typical range for performance fees is often cited as being around 20% of the profits generated by the fund. This figure can vary somewhat depending on the specific fund strategies, market conditions, and the bargaining power of the investors, but the most common benchmark tends to be in the range of 18% to 25%.

Select the option suggesting a percentage range of 14% to 18% might represent historical norms or some specialized funds, but it generally does not reflect the standard in the broader hedge fund industry. While a range of 10% to 14% might apply to some lower-risk investment strategies or specific types of funds, it is not characteristic of hedge funds overall. Therefore, the typical performance fee range is more accurately captured at the higher end of the spectrum to align with the common industry practice, where the standard practices tend to lean towards the 18% to 25% bracket.