Hedge Fund Correlations and Returns

[qwerty07]

With hedge funds charging their 2 and 20 fee for instance,what hurdle rate do hedge funds use for their 20% perfromance fee. For eg. do they earn their performance fee if the return exceeds 10% or if it exceeds a benchmark index like the S&P.



Also how do hedge fund data providers allow for the performance fee in their monthly return figures?



Upon examination of hedge fund correlations with the markets, the period from 1997 - 2001 has shown an extremely high degree of correlation. Upon my own analyis to date I have found that the correlation is extremely low and negative on occasions for 2001 - 2007. This is based on monthly net of fee returns from hedge fund data providers.



Am I right in my analysis and has anybody any comments or useful evidents/links to confirm this?



Many Thanks.

[Rookie_Quant]

Hurdle rates are usually a risk-free index of some sort.



Data providers are almost always net of all fees.



I suggest looking at upside and downside correlation separetely. I think you will find a very useful and interesting conclusion from that type of analysis.