Citi Business Advisory Services (Citi) recently issued the results of its 2014-15 Annual Hedge Fund Operating Metrics Survey (formerly called The Hedge Fund Business Expense Survey), which focused on hedge fund management fee revenues, operating expenses, operating margins, performance fee income and overall profitability.  In this article, the first of two, we summarize Citi’s methodology, survey demographics and its findings with regard to hedge fund profitability in both 2013 and 2014.  The second article will cover the growing importance of management fees for hedge fund managers and how deriving a greater portion of total profits from management fees may improve a fund manager’s valuation.  For coverage of Citi’s 2013 survey, see “Citi Prime Finance Survey Reveals Levels and Mix of Expenses Incurred by Hedge Fund Managers of Different Sizes, Firm Profitability and Margins, Use of Chargebacks and Impact of Regulations on Expenses,” Hedge Fund Law Report, Vol. 7, No. 1 (Jan. 9, 2014).  For another recent perspective on hedge fund management company expenses, see “Ernst & Young’s 2014 Global Hedge Fund and Investor Survey Considers Growth Areas for Hedge Fund Managers, Related Costs and Challenges, Operating Expenses and Cybersecurity,” Hedge Fund Law Report, Vol. 8, No. 2 (Jan. 15, 2015).