Hedge Fund Investing: A Practical Approach to Understanding Investor Motivation, Manager Profits, and Fund Performance

Fund Terms and Conditions

A global macro fund generally offers investors terms that reflect the low-cost nature of their operations and the liquidity of their strategies.

Fees are paid to hedge fund managers to cover fixed costs and to incentivize the manager to generate absolute rather than relative returns. Fees charged by global macro funds generally include a 1 percent management fee and a 15 to 20 percent performance fee, although there is a wide range.

Investors who want their money back and wish to redeem their investment can only do so according to the terms of the fund. Typically, funds restrict the redemption period so inventors cannot freely redeem. A global macro fund generally offers the shortest and most frequent redemption period. Some funds, in fact, offer daily or weekly redemption; however, the vast majority of funds offer their investors the ability to redeem only once each month.

An investor who decides to redeem must give the manager notice. Global macro funds tend to offer relatively short notice periods of perhaps 7 to 10 days. To redeem at the end of a month, an investor needs to inform the manager by the 20th of the month.

Table 4.9 shows the typical profile of the scope of mandate, products traded, terms, and leverage offered by a global macro fund.

Table 4.9 Profile of a Typical Global Macro Fund.

Geographic mandate	Global
Fund capacity	$1 billion plus
Fund AUM	$400 million
Hurdle rate	No
Products traded	Futures, index options, commodities, ...