Management fee = year end NAV * 2% = 642 * 2% = 12.84 Incentive fee = {year end NAV – high watermark * (1 + hurdle rate)} * 20% = {642 – 610 * 1.04} * 20% = {642 – 634.4} * 20% = {7.6} *20% = 1.52 Net fee = Management fee + Incentive fee = 12.84 + 1.52 = 14.36 Year end NAV net of all fee = Year endRead more
Management fee = year end NAV * 2%
= 642 * 2%
= 12.84
Incentive fee = {year end NAV – high watermark * (1 + hurdle rate)} * 20%
= {642 – 610 * 1.04} * 20%
= {642 – 634.4} * 20%
= {7.6} *20%
= 1.52
Net fee = Management fee + Incentive fee
= 12.84 + 1.52
= 14.36
Year end NAV net of all fee = Year end NAV – Net fee
= 642 – 14.36
= 627.64
Net return = {(year end NAV net of all fee/beginning NAV) – 1} * 100
Waterfall describes the method by which capital is distributed to a fund’s various investors as underlying investments are sold for gains. American-style and European-style are the two structures of waterfall. Whare as Hurdle rate is the minimum amount of return a fund manager should generate to earRead more
Waterfall describes the method by which capital is distributed to a fund’s various investors as underlying investments are sold for gains.
American-style and European-style are the two structures of waterfall.
Whare as Hurdle rate is the minimum amount of return a fund manager should generate to earn incentive fee.
If nothing is specified hurdle rate is considered to be hard and Incentive fee should be considered gross. Attaching this problem with the solution for better understanding.
If nothing is specified hurdle rate is considered to be hard and Incentive fee should be considered gross.
Attaching this problem with the solution for better understanding.
Option A is incorrect because money multiple ignores the timing of cash flows. Option B is correct because IRR calculation involves two assumptions. 1st- Intermediate cash flows invested at the same IRR rate. 2nd- Any project would require the same amount of investment and based on this itself the pRead more
Option A is incorrect because money multiple ignores the timing of cash flows.
Option B is correct because IRR calculation involves two assumptions. 1st- Intermediate cash flows invested at the same IRR rate. 2nd- Any project would require the same amount of investment and based on this itself the project with the highest IRR is considered to be the best one.
Option C is incorrect because PE fund shows high volatility.
Alter Invst
Maximum Drawdown is maximum loss of fund from peek to trough at any given period of time
Maximum Drawdown is maximum loss of fund from peek to trough at any given period of time
See lessalternative invvestment
Restrictions on redemptions refer to Notice period and Lock in period which is true in case of many hedge funds.
Restrictions on redemptions refer to Notice period and Lock in period which is true in case of many hedge funds.
See lessManagement fee calculation
Management fee = year end NAV * 2% = 642 * 2% = 12.84 Incentive fee = {year end NAV – high watermark * (1 + hurdle rate)} * 20% = {642 – 610 * 1.04} * 20% = {642 – 634.4} * 20% = {7.6} *20% = 1.52 Net fee = Management fee + Incentive fee = 12.84 + 1.52 = 14.36 Year end NAV net of all fee = Year endRead more
Management fee = year end NAV * 2%
= 642 * 2%
= 12.84
Incentive fee = {year end NAV – high watermark * (1 + hurdle rate)} * 20%
= {642 – 610 * 1.04} * 20%
= {642 – 634.4} * 20%
= {7.6} *20%
= 1.52
Net fee = Management fee + Incentive fee
= 12.84 + 1.52
= 14.36
Year end NAV net of all fee = Year end NAV – Net fee
= 642 – 14.36
= 627.64
Net return = {(year end NAV net of all fee/beginning NAV) – 1} * 100
= {(627.64/583.1) – 1} * 100
= {1.0764 – 1} * 100
= 0.0764 * 100
= 7.64% Answer
See lesshurdle
Yes, consider hard hurdle if nothing is specified in the question. And if hurdle rate is not given incentive fee should be calculated on total return.
Yes, consider hard hurdle if nothing is specified in the question.
And if hurdle rate is not given incentive fee should be calculated on total return.
hurdle rate
Yes, if nothing is mentioned assume hard hurdle.
Yes, if nothing is mentioned assume hard hurdle.
See lessHurdle
The question specifies the fund has an 80%/20% carried interest incentive fee structure, Hence 32m is divided into ratio of 4:1.
The question specifies the fund has an 80%/20% carried interest incentive fee structure, Hence 32m is divided into ratio of 4:1.
See lessAI- Soft Hurdle or Hard Hurdle
No, If nothing is mentioned hurdle rate should be assumed hard.
No, If nothing is mentioned hurdle rate should be assumed hard.
See lessHurdle rate
Waterfall describes the method by which capital is distributed to a fund’s various investors as underlying investments are sold for gains. American-style and European-style are the two structures of waterfall. Whare as Hurdle rate is the minimum amount of return a fund manager should generate to earRead more
Waterfall describes the method by which capital is distributed to a fund’s various investors as underlying investments are sold for gains.
American-style and European-style are the two structures of waterfall.
Whare as Hurdle rate is the minimum amount of return a fund manager should generate to earn incentive fee.
See lessHard hurdle
If nothing is specified hurdle rate is considered to be hard and Incentive fee should be considered gross. Attaching this problem with the solution for better understanding.
If nothing is specified hurdle rate is considered to be hard and Incentive fee should be considered gross.
Attaching this problem with the solution for better understanding.
See lessAlternative investments
Option A is incorrect because money multiple ignores the timing of cash flows. Option B is correct because IRR calculation involves two assumptions. 1st- Intermediate cash flows invested at the same IRR rate. 2nd- Any project would require the same amount of investment and based on this itself the pRead more
Option A is incorrect because money multiple ignores the timing of cash flows.
Option B is correct because IRR calculation involves two assumptions. 1st- Intermediate cash flows invested at the same IRR rate. 2nd- Any project would require the same amount of investment and based on this itself the project with the highest IRR is considered to be the best one.
Option C is incorrect because PE fund shows high volatility.
See less