As a wealthy individual investor, you are planning to invest your $2 million in a fund of funds which invests in 2 different hedge funds, namely hedge fund A and B. The incentive fees are 20% for all funds including the fund of funds. The incentive fee is applicable when a fund earns a positive return. Let’s assume that funds A and B generate 10% and -15% gross returns, respectively. Given the information above, please fill out the below table. You can copy and paste the table to the answer section and fill it out there. You may want to show your calculations in the space below the table. Fund A Fund B Fund of Funds Start of year (millions) $1.00 $1.00 $2.00 End of year (millions) $ $ $ Gross rate of return % % % Incentive fee (millions) $ $ $ End of year, net of fee $ $ $ Net rate of return % % %
As a wealthy individual investor, you are planning to invest your $2 million in a fund of funds which invests in 2 different hedge funds, namely hedge fund A and B. The incentive fees are 20% for all funds including the fund of funds. The incentive fee is applicable when a fund earns a positive return. Let’s assume that funds A and B generate 10% and -15% gross returns, respectively.
Given the information above, please fill out the below table. You can copy and paste the table to the answer section and fill it out there. You may want to show your calculations in the space below the table.
|
Fund A |
Fund B |
Fund of Funds |
|
|
Start of year (millions) |
$1.00 |
$1.00 |
$2.00 |
|
End of year (millions) |
$ |
$ |
$ |
|
Gross |
% |
% |
% |
|
Incentive fee (millions) |
$ |
$ |
$ |
|
End of year, net of fee |
$ |
$ |
$ |
|
Net rate of return |
% |
% |
% |
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