What a hedge fund leaves you after fees and tax
Gross return, the manager's fees with hurdle and high-water mark, and the tax that applies to you, over the holding period. It also works backwards: the gross return a fund must earn for you to keep what you need.
By Eldar Edmond Grady, CEO, PPLI.com. Research checked 27 September 2026.
Singapore law as at 27 September 2026, Year of Assessment 2026, for an individual resident in Singapore who holds the portfolio or policy personally. Home-country rates are the 2026 figures stated on the page.
PPLI.com is a research publisher, not an insurer, broker or financial adviser, and is not licensed by the Monetary Authority of Singapore. Nothing here is an offer of insurance. To buy a policy, deal with an insurer or adviser licensed or exempted by MAS and check it on the MAS Financial Institutions Directory.
Three returns, not one
A fund has a gross return, a reported return after its fees, and the return its investor keeps after tax. Only the second appears on a factsheet.
For a resident taxed only in Singapore the last two are the same. For a US person, income is taxed at 40.8% and realised gains at 23.8%, and because the fund's fees are not deducted in this model, tax falls on the result before fees.
Turnover decides how much of each year's growth is taxed that year. For most trading strategies it is close to 100%, which turns a deferred gain into an annual one.
Standard terms, first year
Hypothetical. Gross 10%, management fee 2%, performance fee 20%, no hurdle, high-water mark applied. A fifth of the result is income; 80% of the growth is realised.
Gross return 10.00%
Management fee −2.00%
Performance fee 20% x (10% − 2%) −1.60%
Reported net 6.40%
Tax, US person 2% x 40.8% + 6.4% x 23.8% −2.34%
Kept, US person 4.06%
Kept, Singapore only 6.40%Over a long holding period the fee also compounds against you: money taken early as fees and tax would itself have grown. The breakdown in the instrument shows that as a separate line.
What the X-Ray applies
Fees
Management fee on the value at the start of each year; performance fee on the result after the management fee, above a hard or soft hurdle and, if applied, above the high-water mark.
Tax
Income at the rate on interest and other income; realised gains at the gains rate, blended with the income rate for the share of gains you mark as taxed as income. Losses are carried forward against later gains.
Working backwards
The gross return required to keep a target is found by trying gross returns until the net result fits. It is the same model, solved for the input.
Common questions
What does "gains taxed as income" mean?
The share of realised gains your tax system taxes as income rather than as gains. Some systems tax gains on certain offshore funds as income, and for a US person a foreign fund can be a PFIC. Set the share from your adviser's figure; 0 treats every gain as a gain.
Instruments and related reading
Private credit real yieldThe same treatment for a credit fundOpen →Tax drag calculatorThe whole portfolio's annual tax costOpen →Alternative investment intelligenceHedge funds and private credit togetherOpen →Who picks the investmentsInvestor control and what a policy can holdOpen →PPLI.com is a research publisher, not an insurer, broker or financial adviser, and is not licensed by the Monetary Authority of Singapore. This page is general information about how tax systems treat a portfolio and a life insurance policy. It is not an offer of insurance and not advice on any product. A policy from an insurer not licensed in Singapore is outside the Policy Owners' Protection Scheme and outside Singapore statutory nominations.
The authorities this page relies on
IRAS, gains from sale of property, shares and financial instruments
Gains from the sale of shares and financial instruments are generally not taxable, and gains from trading can be. IRAS lists "payouts from insurance policies as they are capital receipts" among gains that are generally not taxable. iras.gov.sg, gains
Rev. Proc. 2025-32 and 26 USC 1411
For 2026 the 37% rate applies above US$640,600 of taxable income for a single filer and the 20% rate on long-term gains and qualified dividends above US$545,500. The 3.8% net investment income tax (s 1411) does not apply to nonresident aliens, so it does apply to US citizens abroad. Top combined rates: 40.8% and 23.8%. irs.gov, Rev. Proc. 2025-32
26 USC 1297, passive foreign investment companies
A foreign corporation is a PFIC if 75% or more of its income is passive or 50% or more of its assets are passive. A US person who holds such funds directly falls under ss 1291 to 1298 and files Form 8621. law.cornell.edu, s 1297
PRC Individual Income Tax Law, arts 1, 3 and 4
A person domiciled in China, meaning habitually resident there because of household registration, family or economic ties, is a resident taxed on worldwide income (art 1). Interest, dividends and property-transfer income are taxed at 20% (art 3). Insurance compensation is exempt (art 4). chinatax.gov.cn, IIT Law
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