The Hedge Fund Report: Graduating From Harvard

Okumus picks have a hit ratio is 90, meaning that 90 trades out of 100 are profitable. The firm's flagship Okumus Opportunity Fund generated a 29% net annualized return since inception in 1997 with no down years, according to Okumus.

But investing in the new long-only fund has a catch: investors will have to choose between different liquidity options. And the more liquid the class, the more expensive it is.

A detailed look at the three share classes is instructive. Class 1 charges the usual 1.50% management fee and 20% performance fee with a straightforward one-year lock-up. The hurdle rate is the S&P 500 benchmark, meaning that the performance fee kicks in only when the manager beats the index.

Class 2 is cheaper. The management fee is 1%; the performance fee is 17.5%; and the hurdle remains the S&P 500. This time, though, there is a three-year lock-up, hence, the lower cost.

With class 3, which has a one-year lockup, the management fee drops to 0.75%, but the investor faces a 50% performance fee. The 50% fee works as a so-called "hard hurdle," meaning it is paid on the difference between the fund's return and the S&P 500 benchmark, not as a percentage of overall performance. It looks like a good deal, but if the manager is good and consistently consistently beats the S&P (which this manager has since 1997), class 3 winds up being more expensive than class 2.

For example, in class 2, if the S&P 500 yields 5% and the fund returns 10%, the investor would pay 17.5% of 10%, or 1.75%. In the case of class 3, his performance fee would be 50% of 5%, or 2.50%.

Testing Waters

It was a good week for American International Group(AIG Quote). The company agreed to a $1.64 billion settlement, lifting a cloud on its past as well as its shares.

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