Five years ago, a hedge fund started with $200 million of assets under management and generated an average annual return of 30% for each of the first two years. With this outstanding performance, the hedge fund attracted $500 million in new assets at the start of year 3 and $300 million at the start of year 4 and earned 0% in years 4 and 5. Required a. What was the hedge fund's time-weighted average annual return over the five-year period? a. What average annual return did the average investor in the hedge fund actually earn over the five-year period? What is this return called?

Five years ago, a hedge fund started with $200 million of assets under management and generated an average annual return of 30% for each of the first two years. With this outstanding performance, the hedge fund attracted $500 million in new assets at the start of year 3 and $300 million at the start of year 4 and earned 0% in years 4 and 5. Required a. What was the hedge fund's time-weighted average annual return over the five-year period? a. What average annual return did the average investor in the hedge fund actually earn over the five-year period? What is this return called?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

Heer
Required: A hedge fund with $1.7 billion of assets charges a management fee of 2% and an incentive fee of 20% of returns over a money market rate, which currently is 5%. Calculate total fees, both in dollars and as a percent of assets under management, for portfolio returns of (Enter your answers in millions rounded to 1 decimal place.) Answer is complete but not entirely correct. Portfolio Rate of Return (%) b.0 c. 5 d. 10 Total Fee ($ million) 34,000,000.0 34,000,000.0 34,000,000.0 51,000,000.0 Total Fee (%) 2.0 WNNN oooo 2.0 2.0 3.0 ››
Review the excerpted table of historic returns shown below. The returns have all been annualized after having calculated monthly returns for the previous five years. In addition, information is provided about the average, the volatility, and the sensitivity of the possible investments. Time Period # Market Return Firm W Firm X Firm Y Firm Z T-Bill 1 0.333 0.191 0.218 0.955 0.601 0.035 2 -0.144 -0.423 -0.632 -0.747 -0.472 0.039 3 0.143 0.348 0.470 0.379 0.378 0.040 4 0.316 0.871 0.868 -0.192 0.502 0.036 5 0.178 0.912 0.499 0.694 0.364 0.036 6 -0.014 0.532 0.168 -0.671 -0.064 0.038 … … … … … … … … … … … … … … 59 0.374 0.556 1.014 0.023 0.698 0.037 60 0.173 0.547 0.092 0.658 0.222 0.036 Average Return 0.082 0.113 0.067 0.167 0.121 0.029 Standard…
You invest $10,000 today in the S&P 500 and expect to have a 8.25% return. After the Iinitial $10,000 investment you invest an additional $1000 per year but this $1000 will increase by 5% each year. Using excel show account balances from years 0 to 350 and assume this investment is put into a triple-levered Nasdaq index fund instead of the S&P 500 and the annual returns are 13.4%
A hedge fund with a 1 and 15 fee structure has a hard hurdle rate of 7.45%. If the incentive fee and management fee are calculated independently and the management fee is based on beginning-of-period asset values, an investor’s net return over a period during which the grows value of the fund has increase 19.45% is closest to A. 10.85%. B. 12.65%. C. 16.65%. D. 21.74%.
Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 85 years has averaged roughly 8% more than the Treasury bill return and that the S&P 500 standard deviation has been about 31% per year. Assume these values are representative of investors' expectations for future performance and that the current T-bill rate is 3%. Calculate the utility levels of each portfolio for an investor with A = 2. Assume the utility function is u = E(r) 0.5 × Ao². Note: Do not round intermediate calculations. Round your answers to 4 decimal places. Negative amounts should be indicated by a minus sign. WBills 0.0 0.2 0.4 0.6 0.8 1.0 Windex 1.0 0.8 0.6 0.4 0.2 0.0 U(A = 2)
You invested $90,000 in a mutual fund at the beginning of the year when the NAV was $54.3. At the end of the year, the fund paid $.40 in short-term distributions and $.57 in long-term distributions. If the NAV of the fund at the end of the year was $63.94, what was your return for the year? (A negative value should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
A hedge fund charges a management fee of 3 percent and an incentive fee of 25 percent for all returns over a benchmark return of 4%. The risk-free rate is 2% and the standard deviation of the funds continuously compounded returns has been 23%. The current net asset value is $55 per share. What is the value of all fees expressed as a percent at the start of the investment period?
7. Impacts of Costs on Returns. A mutual fund has a 1.6% expense ratio and begins with a $124.655 NAV. It experiences the annual returns shown below. What are the end-of-year NAVS after fees for each year? What are the after-fee returns each year? (LO 4-4) Money to Invest NAV Expense ratio Year 1 return Year 2 return Year 3 return Year 4 return Year 5 return $ 10,000.00 $ 124.655 1.6% 5% -12% 18% 4% 23%
Required: A hedge fund with $0.7 billion of assets charges a management fee of 3% and an incentive fee of 20% of returns over a money market rate, which currently is 6%. Calculate total fees, both in dollars and as a percent of assets under management, for portfolio returns of: (Enter your answers in millions rounded to 1 decimal place.) Required: A hedge fund with $0.7 billion of assets charges a management fee of 3% and an incentive fee of 20% of retums over a money market rate, which currently is 6%. Calculate total fees, both in dollars and as a percent of assets under management, for portfolio returns of: (Enter your answers in millions rounded to 1 decimal place.) Required: A hedge fund with $0.7 billion of assets charges a management fee of 3% and an incentive fee of 20% of returns over a money market rate, which currently is 6%. Calculate total fees, both in dollars and as a percent of assets under management, for portfolio returns of: (Enter your answers in millions rounded to…
Consider historical data showing that the average annual rate of return on the S&P 500 portfolio over the past 90 years has averaged roughly 8% more than the Treasury bill return and that the S&P 500 standard deviation has been about 20% per year. Assume these values are representative of investors' expectations for future performance and that the current T-bill rate is 5%. Calculate the utility levels of each portfolio for an investor with A = 3. Assume the utility function is u = round intermediate calculations. Round your answers to 4 decimal places.) E(r) WBills 0.0 0.2 0.4 0.6 0.8 1.0 Windex 1.0 0.8 0.6 0.4 0.2 0.0 U(A = 3) 0.5 × Ao². (Do not
ABC 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…

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS