In Funds Management, investors' capital is combined into a single fund account managed by the Fund Manager. The Fund Manager trades with this pooled capital, and profits are distributed to each investor based on their equity share in the fund.
Equity Share Calculation
The equity share determines how trading results are allocated to each investment in the fund and is calculated using this formula:
Equity Share = Individual Investment Equity ÷ Total Fund Equity
Investment equity represents the amount an investor has in their account, including any unrealized profits or losses from open positions.
Profit Distribution Example
Let's examine how profit distribution works with three investors:
Investor A invests $60,000
Investor B invests $30,000
Investor C invests $10,000
The total fund size is $100,000, and the Fund Manager charges a 25% Performance Fee on profits.
During the investment period, the fund achieves a 15% gain, generating $15,000 in profits. After deducting the Performance Fee of $3,750 (25% of $15,000), the remaining $11,250 is distributed among investors based on their equity share:
Investor A (60% of fund): Receives $6,750 (60% of $11,250)
Investor B (30% of fund): Receives $3,375 (30% of $11,250)
Investor C (10% of fund): Receives $1,125 (10% of $11,250)
Illustration only: these amounts use the stated assumptions and a simplified eligible-profit calculation. Actual allocation and Performance Fee depend on each investment's equity share and timing, open profit or loss, subscriptions and redemptions, the High-Water Mark calculation, fees and costs, rounding, and current fund records. The example does not guarantee a profit or payout amount.
How Performance Fees Are Calculated