Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
Question
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Chapter 20, Problem 19C
Summary Introduction

(a)

To calculate:

The return to an investor computed after considering the incentive fees of total returns at 20% in the fund of funds.

Introduction:

The hedge fund is that type kind of fund in which there is no interference of government and law. This fund is a private pool fund which made from taking money from the big investors & close people and invests them in different kinds of securities.

An incentive fee is the amount charged by the fund managers to achieve an excess return over the set criteria of the rate of investment.

Summary Introduction

(b)

To calculate:

The value of portfolio for the investor made by a standalone hedge fund, which purchases the same three underlying funds, after paying the incentive fees of 20% at the end of the year.

Introduction:

The hedge fund is that type kind of fund in which there is no interference of government and law. This fund is a private pool fund which made from taking money from the big investors & close people and invests them in different kinds of securities.

An incentive fee is the amount charged by the fund managers to achieve an excess return over the set criteria of the rate of investment.

Summary Introduction

(c)

To determine:

There is a difference of an amount, which is equal to the extra fees charged by fund of funds, which shows that the return of investor in standalone fund is higher than the one in fund of funds.

Introduction:

The hedge fund is that type kind of fund in which there is no interference of government and law. This fund is a private pool fund which made from taking money from the big investors & close people and invests them in different kinds of securities.

Incentive fees is the amount charged by the fund managers to achieve an excess return over the set criteria of the rate of investment.

Summary Introduction

(d)

To calculate:

The value of portfolio in both the funds and the rate of return of portfolio, if the return on portfolio in hedge fund 3 is 30%

Introduction:

The hedge fund is that type kind of fund in which there is no interference of government and law. This fund is a private pool fund which made from taking money from the big investors & close people and invests them in different kinds of securities.

An incentive fee is the amount charged by the fund managers to achieve an excess return over the set criteria of the rate of investment.

Summary Introduction

(e)

To detemine:

The observation on the charging of incentive fees in case of return on portfolio in hedge fund 3 is negative by standalone or fund of funds and the reason for bad condition of investors in fund of funds than the investors of standalone.

Introduction:

An incentive fee is the amount charged by the fund managers to achieve an excess return over the set criteria of the rate of investment.

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