Terminology
While this article uses the term "NAV" for simplicity, in reality a performance fee would be charged by reference to the NAV per share (being the net asset value divided by the number of shares in issue). The NAV will fluctuate as investors subscribe for and redeem shares, whereas the NAV per share will only fluctuate as the underlying investments increase or decrease in value, making the latter the appropriate measure for calculating a performance fee.
Where a hedge fund is structured as a limited partnership or unit trust, the terms "interest" and "unit" should be substituted for "share" .
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