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Fees such as trading costs are a percentage of trading volume. Therefore, the more money you are managing, the higher your trading costs. (i.e those costs are
by LysPJ 2y ago
Fees such as trading costs are a percentage of trading volume.
Therefore, the more money you are managing, the higher your trading costs. (i.e those costs are "fixed" but its a "fixed percentage" rather than a static number.)
- csomar 2y agoI highly doubt trading costs are part of the 2% management fee.
- kasey_junk 2y agoIn my experience they absolutely are part of the 2% fee. Why do you think they aren’t?
- csomar 2y agoIn that case, how can the rate be fixed or does that mean that the hedge fund limits its trade turn-over. In other words, if your trading fees are 0.2% and your trading volume is 10 times the capital raised, you already burned through your management fee.
- kasey_junk 2y agoThat’s why they are fixed percentage not fixed. Trading fees go up with the amount of capital moved but mostly in a linear fashion. Calculating your trading costs (and usually more importantly slippage) is absolutely table stakes for a fund that trades. For most funds that’s relatively easy as the trading component is a cost center that you can outsource for predictable prices. For funds that aren’t treating trades as cost centers, well it’s presumably part of what you are selling so you better be good at it.
- SkyMarshal 2y agoWhat else would they be part of? It's an operational cost.