Net-of-Fees Return Calculator

Converting Gross to Net Returns

The reported returns of alternative funds can sometimes be confusing because they might be stated on a "gross" basis. The net of fees return calculator bridges the gap between what the fund earned in the market and what you, the investor, actually receive in your pocket. This process is essential for making fair comparisons between different funds and assessing their true performance.

The Layers of Fees

Typically, an investor faces multiple layers of cost that erode the gross returns:

• Admin and Other Expenses: These are the operating costs of the fund, including audit, legal, and administrative expenses. While small, they are deducted before other fees.
• Management Fees: A fixed percentage taken by the manager for operating the fund.
• Performance Fees: A percentage taken from the profits, usually calculated after admin and management fees are accounted for.

The Mathematical Formula:
Gross Multiplier = 1 + (Gross Return % / 100)
After Admin = Gross Multiplier - (Admin Fee % / 100)
After Mgt Fee = After Admin - (Management Fee % / 100)
Eligible Return for Perf Fee = Max(0, After Mgt Fee - 1)
Perf Fee Impact = Eligible Return × (Performance Fee % / 100)
Net Multiplier = After Mgt Fee - Perf Fee Impact
Net Return % = (Net Multiplier - 1) × 100

The stacked bar chart visually demonstrates how a substantial gross return is sliced up. The total width of the stacked bar represents the initial gross return, and the varying colors indicate the portions consumed by different expenses, leaving the green segment as the final net return.

Related Calculators

• CAGR Calculator - Compound these net returns over time.
• Hedge Fund Fee Calculator - Focus strictly on the 2/20 structure.