Hedge Fund vs Private Equity Fund Fees

Both hedge funds and private equity funds have similar management and incentive fee structures.  Hedge funds have the famous "2 and 20".  Private equity charge 1% to 3.5% management fee with a 20% to 30% incentive fee.  However, hedge funds charge fees differently:

• Hedge fund fees are calculated based on net asset value while private equity fees are based on realized gains
• Hedge fund fees are collected on a quarterly or semiannual basis
• Incentive fees can be collected before any return of investor capital
• No clawback agreement
• Lower hurdle rates.  The manager will not charge performance fees until the hurdle rate is met.