0 Karan AroraIntermediate Asked: November 23, 20212021-11-23T16:59:59+05:30 2021-11-23T16:59:59+05:30In: Alternative Inv (CFA L1) Alternative investments 0 Pls help. Share Sorry, you do not have permission to answer to this question. 1 Answer Oldest Best Answer Vidya Khanna The Official Nerd 2021-11-23T17:12:49+05:30Added an answer on November 23, 2021 at 5:12 pm Check year wise Year 1: Management fees= 112*0.02 = 2.24 Incentive fees= (112-98)*0.2 = 2.8 Fund’s value after fees = 112-5.04 = 106.96 (This is highest value since inception so this is high water mark) Year 2: Since year end value does not cross the high water mark i.e., 106.96 so only management fees will be given. Year 3: year value crossed high water mark Management fees = 116*0.02 = 2.32 Incentive fees = (116-106.96)*0.2 = 1.808 Fund’s value after fees = 116-4.128 = 111.872 Net of fees Return = (111.872-98)/98*100 = 14.155 Hence, option A is the answer Hope this helps!
Check year wise
Year 1:
Management fees= 112*0.02 = 2.24
Incentive fees= (112-98)*0.2 = 2.8
Fund’s value after fees = 112-5.04 = 106.96 (This is highest value since inception so this is high water mark)
Year 2:
Since year end value does not cross the high water mark i.e., 106.96 so only management fees will be given.
Year 3:
year value crossed high water mark
Management fees = 116*0.02 = 2.32
Incentive fees = (116-106.96)*0.2 = 1.808
Fund’s value after fees = 116-4.128 = 111.872
Net of fees Return = (111.872-98)/98*100 = 14.155
Hence, option A is the answer
Hope this helps!