Maurice Tutor

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About Maurice Tutor

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Algebra,Applied Sciences See all
Algebra,Applied Sciences,Biology,Calculus,Chemistry,Economics,English,Essay writing,Geography,Geology,Health & Medical,Physics,Science Hide all
Teaching Since: May 2017
Last Sign in: 401 Weeks Ago, 2 Days Ago
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Education

  • MCS,PHD
    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

Experience

  • Professor
    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 23 Aug 2017 My Price 14.00

incentive fee

  1. Here are data on three hedge funds. Each fund charges its investors an incentive fee of 20% of total returns. Suppose initially that a fund of funds (FF) manager buys equal amounts of each of these funds and also charges its investors a 20% incentive fee. For simplicity, assume also that management fees other than incentive fees are zero for all funds. (LO 20-4)

    1. Compute the rate of return after incentive fees to an investor in the fund of funds.

    2. Suppose that instead of buying shares in each of the three hedge funds, a stand-alone (SA) hedge fund purchases the same portfolio as the three underlying funds. The total value and composition of the SA fund is therefore identical to the one that would result from aggregating the three hedge funds. Consider an investor in the SA fund. After paying 20% incentive fees, what would be the value of the investor’s portfolio at the end of the year?

    3. Confirm that the investor’s rate of return in SA is higher than in FF by an amount equal to the extra layer of fees charged by the fund of funds.

    4. Now suppose that the return on the portfolio held by hedge fund 3 were 230% rather than 130%. Recalculate your answers to parts ( a ) and ( b ). Will either FF or SA charge an incentive fee in this scenario? Why then does the investor in FF still do worse than the investor in SA?

WEB master

Log on to www.hedgeindex.com, a site run by Credit Suisse/Tremont, which maintains the TASS Hedge Funds Database of the performance of more than 2,000 hedge funds and produces indexes of investment performance for several hedge fund classes. Click the Downloads tab (free registration is required for access to this part of the website). From the Downloads page, you can access historical rates of return on each of the hedge fund subclasses (e.g., market neutral, event driven, dedicated short bias, and so on).

  1. Download the most recent five years of monthly returns for each subclass and download returns on the S&P 500 for the same period from finance.yahoo.com.

  2. Calculate the beta of the equity market–neutral and dedicated short bias funds. Do the results seem reasonable in terms of the orientation of these funds?

  3. Look at the year-by-year performance of each hedge fund class. How does the variability of performance results in different years compare to that of the S&P 500?

    www.mhhe.com/bkm

Answers

Maurice Tutor
(5)
Status NEW Posted 23 Aug 2017 01:08 PM My Price 14.00

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