Concept explainers
(a)
To calculate:
The total fees, both in dollars and percents for portfolio return of
Introduction:
The total fees is a sum total of management fees and incentive fees and when it is divided by the asset value then the outcome is the total fees in terms of percentage.
(b)
To calculate:
The total fees, both in dollars and percents for portfolio return of
Introduction:
The total fees is a sum total of management fees and incentive fees and when it is divided by the asset value then the outcome is the total fees in terms of percentage.
(c)
To calculate:
The total fees, both in dollars and percents for portfolio return of
Introduction:
The total fees is a sum total of management fees and incentive fees and when it is divided by the asset value then the outcome is the total fees in terms of percentage.
(d)
To calculate:
The total fees, both in dollars and percents for portfolio return of
Introduction:
The total fees is a sum total of management fees and incentive fees and when it is divided by the asset value then the outcome is the total fees in terms of percentage.
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Check out a sample textbook solution- A fund manager has a well-diversified portfolio that mirrors the performance of the S&P 500and is worth $240 million. The value of the S&P 500 is 4,800, and the portfolio manager wouldlike to obtain insurance against a reduction of more than 3% in the value of the portfolio over thenext four months. The risk-free interest rate is 6% per annum. The dividend yield on both theportfolio and the S&P 500 is 4%, and the volatility of the index is 35% per annum. What amount(in dollars) of the portfolio should be sold and kept in risk-free securities for portfolio insurance?arrow_forwardABC CAPITAL is a hedge fund with $300 million of initial investment capital. They charge a 2 percent management fee based on assets under management at year- end and a 20 percent incentive fee. In its first year, ABC Capital has a 80 percent return. Assume management fees are calculated using end-of-period valuation. 1. What are the fees earned by ABC if the incentive and management fees are calculated independently? What is an investor’s effective return given this fee Structure? 2. What are the fees earned by ABC assuming that the incentive fee is calculated based on return net of the management fee? What is an investor’s net return given this fee structure? 3. If the fee structure specifies a hurdle rate of 5 percent and the incentive fee is based on returns in excess of the hurdle rate, what are the fees earned by ABC assuming the performance fee is calculated net of the management fee? What is an investor’s net return given this fee structure? 4. In the second year, the fund…arrow_forwardABC CAPITAL is a hedge fund with $300 million of initial investment capital. They charge a 2 percent management fee based on assets under management and a 20 percent incentive fee. In its first year, ABC Capital has a 20 percent return. Assume management fees are calculated using beginning-of-period valuation. 1. What are the fees earned by ABC if the incentive and management fees are calculated independently? What is an investor’s effective return given this fee Structure? 2. What are the fees earned by ABC assuming that the incentive fee is calculated based on return net of the management fee? What is an investor’s net return given this fee structure? 3. If the fee structure specifies a hurdle rate of 5 percent and the incentive fee is based on returns in excess of the hurdle rate, what are the fees earned by ABC assuming the performance fee is calculated net of the management fee? What is an investor’s net return given this fee structure? 4. In the second year, the fund value…arrow_forward
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