问题如下：
The Tree Fallers Endowment plans to allocate part of its portfolio to alternative investment funds. The endowment has hired Kurt Summer, a consultant at Summer Brothers Consultants, to identify suitable alternative investment funds for its portfolio.
Summer has identified three funds for potential investment and will present the performance of these investments to the endowment’s board of directors at their next quarterly meeting.
Summer is reviewing each of the fund’s fee schedules and is concerned about the manager’s incentive to take on excess risk in an attempt to generate a higher fee. Exhibit 1 presents the fee schedules of the three funds.
Exhibit 2 presents the annual gross returns for each fund and its respective benchmark for the period of 2016–2018. All funds have an inception date of 1 January 2016. Summer intends to include in his report an explanation of the impact of the fee structures of the three funds on returns.
The board of directors of the Tree Fallers Endowment asks Summer to recalculate the fees of the Red Grass Fund assuming a high-water mark feature whereby a sharing percentage could only be charged to the extent any losses had been recouped.
3 Based on Exhibit 1 and Exhibit 2, the Yellow Wood Fund’s 2016 investment management fee is:
选项：
A. 3.00%
B. 4.20%
C. 4.50%
解释：
B is correct.
The fund’s fee schedule includes a base fee of 1.50% and a 20% performance-based fee. The performance-based fee is applied after the base fee is deducted. The total fee is calculated as follows:
1.5% + [20% × (15% – 1.5%)] = 4.20%
